葛蘭素史克 (GSK) 2003 Q3 法說會逐字稿

Please stand by. Your meeting is about to begin. Be advised this conference is being recorded.

Good morning welcome to the third quarter report for November 20th, 2003.

Your host today will be Dean Linden. Mr. Linden, please go ahead.

Thanks Vickie.

Good morning and thanks for participating in ID Biomedical's third quarter conference call for the quarter ending September 30, 2003.

I'm Dean Linden, Manager of Corporate Communications for ID Biomedical. I'm joined today by Dr. Tony Holler, our Chief Executive Officer, Todd Patrick, our President and Chief Operating Officer, and Richard Bear, ID Biomedical's VP of Finance and Administration.

In a few minutes Richard will discuss our financial highlights for the quarter. And then I will call on Tony to provide a summary of the management's view of the quarter. Then we'll open the call to your questions for Tony, Todd and Richard.

Before we get into proceedings any further, I need to make a brief comment concerning forward-looking statements.

The foregoing information on this conference call contains so-called forward-looking statements. These include statements about ID Biomedical's expectations and beliefs. We indicate these by words and phrases such as anticipate, expect, intend, plan, will, we believe, ID Biomedical believes, management believes and similar such language. Forward-looking statements are based on ID Biomedical's current expectation and are subject to risks, uncertainties and to assumptions made. I encourage to you reference our regulatory filings for further details about these forward-looking statements.

Richard, I will now call on to you present the financial results for the quarter.

Thank you, Dean.

Looking at the financial highlights for the third quarter, ID Biomedical recorded a net loss for the three months ended September 30, 2003, of $8.2 million, or 23 cents per share. As compared to a net loss of $4.7 million, or 15 cents per share for same period in 2002. The net loss for the nine months ended September 30, 2003, was $17.8 million, or 52 cents per share, as compared to a net loss of $9.8 million, or 32 cents per share, the same period in 2002.

Total revenue for the quarter was $2.1 million, versus $0.7 million for the comparable period in 2002. For the nine months ended September 30, 2003, revenue was $5.3 million, versus $10.2 million for comparable period. The decrease in revenue over the comparable nine-month period is attributable to genomic licensing revenues recognized in January, 2002, as a result of the company's agreement with Ticaro Biomedical Group.

Research and development contract revenue in the amount of $1.4 million and $3.3 million was recorded for the three- and nine-month period ended September 30, 2003, compared to 0 for a comparable period in 2002. This revenue increased as a result of our agreement with Dimeport Vaccine Company for development of an antigen or a subunit plague vaccine.

Net research and development expenses increased 134% to $6.8 million for the three-month period ended September 30th, 2003, compared to $2.8 million for the same period in 2002. The nine-month period ended September 30, 2003, these expenses increased 81% to $16.2 million, versus $9 million for the same period in 2002. These increase are associated with the clinical and manufacturing development of the company's vaccine product candidates.

General and administrative expenses increased 18% to $1.4 million poor the three-month period ended September 30, 2003, compared to $1.2 million for the same period in 2002. For the nine-month period ended September 30, 2003, these expenses increased 18% to $4.3 million, versus $3.6 million for the same period in 2002. These expenses are associated with the continued development of our finance, investor relation, and business development activities.

Depreciation and amortization expense relates to equipment, patent and trademark rights, and medical technology and other assets. For the three months ended September 30, 2003, depreciation and amortization expense was $1.1 million compared to the same amount for the three month ended September 30th, 2002. Depreciation and amortization expense for the nine months ended September 30, increased 4% to $3.3 million, compared to the same period in 2002. Comparisons to the previous year amounts are impact by certain assets becoming fully depreciated during the three months ended September 30, 2003, and the increase in the useful life of certain tangible assets which was reflected in our 2002 annual financial statements.

Investment and other income decreased $.1 million for the three months ended September 30, 2003, compared to the three months ended September 30, 2002. Growth and investment income, due to larger cash and short-term investment balances, was offset by significantly less foreign exchanges gains attributable to a decline in U.S. dollar-based assets.

Investment in other income for the nine months ended September 30th, 2003, increased $0.2 million, compared to the same period in 2002. These increases are a result of greater interest income from significantly greater levels of cash and short-term investments. In addition, the company recognized a foreign exchange loss of $0.2 million for the nine months ended September 30th, 2003, as compared to a loss of $0.3 million for the nine months ended September 30th, 2002.

In January of 2003, the company sold its investment in Third Wave Technologies for $2.5 million, resulting in a gain of $1.7 million. The company recognized $0.6 million and $3.8 million in write-down on this investment for the three and nine months ended September 30th, 2002, respectively.

For the three months ended September 30th, 2003, the company recorded a $1.4 million dollar loss from the disposal of intangible assets. This amount represents the unamortized portion of medical technology and patent rights, less the termination of an obligation classified as long term debt related to research program targeting a possible vaccine against microbacterium tuberculosis, which is company is no longer pursuing. For the nine months ended September 30, 2003 the company has recognized a $1.6 million loss from the disposal of intangible assets. The company did not record any loss on disposal of intangible assets for the three and nine month periods ending September 30th, 2002.

The company had cash and short term investments of $40.5 million at September 30th, 2003, as compared to $47.3 million at the end of last quarter and compared to $23.8 million at December 31st, 2002. Working capital at September 30th, 2003, was $37.3 million, as compared to $20.7 million at December 31st, 2002. Increases compared to the December 31st, 2002, are a result of the company's May 2003 equity offerings, less the funding of the company's research and development activities.

Also impacting the company's liquidity capital resources are the exercise of stock options, grants and research contracts, debt repayment, and additions of equipment and patent and trademark rights. Subsequent to September 30th, 2003, the company announced the closing of a unit offering consisting of 5.8 million units, each unit consisting of 1 common share and one-half of one common share purchase warrant at a price of $17.37 U.S. per unit. Following the completion of the financing, the company's cash and short-term investments as of October 31st, 2003, totalled approximately $163 million.

That concludes the financial highlights for the third quarter, for the nine months of the year. Full financial statements for the period will be available on our website or from Cedar later today.

Thanks, Richard.

I will now call on Dr. Tony Holler, ID Biomedical's Chief Operating Officer -- Chief Executive Officer, excuse me, to discuss the company's third quarter.

Thank you, Dean.

The third quarter of 2003 was another quarter of significant progress at ID Biomedical. Last quarter we completed our first human challenge study and announced positive results. In mid-September, ID Biomedical announced results from our second human challenge study of FluINsure.

This study included a placebo arm, a one-dose arm at 30 micrograms, a two-dose arm at 30 micrograms, and a two-dose arm at 15 micrograms. Volunteers were selected for low, pre-existing antibody levels through the challenge influenza virus, and then assigned in a randomized and blinded manner to one of the four arms of the study. The clinical end point of the study was flu-like illness defined as fever, plus any one of upper respiratory, lower respiratory, or systemic symptoms or signs.

The other primary end point is laboratory-confirmed influenza illness. Results showed study subjects who received one of the active doses, either a one-dose or either of the two-dose regimens, were significantly protected against fever, and either systemic illness or upper or lower respiratory disease, the hallmarks of influenza. Among vaccine-treated subjects, 18 of 19 one-dose recipients, or 94%, and 100% of two-dose recipients at both dose levels, were protected from fever. In comparison with placebo recipients, these results represent 75% efficacy among one-dose recipients and 100% efficacy in two-dose recipients. Protection against febrile illness, or fever, will be the key clinical system in our field efficacy studies.

In addition to these data, FluINsure continues to show an excellent safety profile in the human challenge studies. These results, combined with the results from the previous challenge trial, and five previous safety and immunogistic trials, give us added confidence as we move forward to our first field efficacy trial.

The field efficacy trial, which began in November, will enroll about 1320 subjects who will be assigned in a randomized and blinded manner to three study arms. Placebo, one dose at 30 micrograms, and two doses at 15 micrograms. I am pleased to report that enrollment was completed today, ten days ahead of our target. This is important because this year in certain locations, the flu season came early.

This field study has several risks which I would like to discuss.

The first risk is that there is very little influenza this season, which may cause us to have very low rates of influenza in our placebo group. Low rates of flu in the placebo group would make it difficult for the study to show statistically significant data. The information we are receiving so far is that this flu season is likely to be a relatively strong one in terms of previous lens of influenza.

The second risk is that a so-called rogue strain may appear that will not be covered by the vaccine. If the vaccine shows no protective benefit due to a total mismatch of strains, then it will be very difficult for FluINsure to show protection, unless we were able to generate cross-strain protective immune responses. We have never tested for cross-strain protection.

A strain called Fijian A-type has recently been identified in Canada and other countries around the world. Although the strain is not specificly represented in this year's flu vaccines or in FluINsure, the G and A type is similar to the A strain represented in this year's influenza vaccines, including FluINsure.

Health authorities in the U.S. and Canada believe that this year's flu vaccines will provide some protection against the Fijian A-type virus, since it is a variant drift as opposed to an entirely unrelated strain. Additionally, although we have not yet tested for cross-strain protection, intranasal approaches that generate mucosal antibodies could offer the best chance of protection against a drift in the flu strength.

As part of our field efficacy study, study subjects who develop clinical illness will have laboratory confirmation of influenza. Thus, for those subjects that do get the flu we will be able to see if they were protected against the strains that do identically match this year's flu strain, such as A-Panama, or whether it can protect from a different but related strain such as Fijian-A, and if so, whether the vaccine reduces the severity of clinical illness, versus placebo.

Moving to our streptavax program, we continue to make progress this quarter with our Phase II study in healthy adults. To date, we've experienced no safety concerns. The trial is ongoing, and we expect all of our volunteers to complete the dosing regimens by the end of January. We should have preliminary safety data by the end of the first quarter, and immunogistic data by the second quarter. We will seek approval to begin testing the vaccine in children.

During the third quarter, we made the decision to bolster the company's balance sheet in anticipation of moving to larger clinical trials and the associated investments in facilities and personnel required to support these programs. Initially, in September we have elected to pursue a public financing to raise approximately, U.S., $100 million. With our share price at that time, we would have issued about 5.25 million shares to raise that amount. But with typical discounts, we expect that number would probably be closer to 5.75 million shares.

On the very day that we filed our prospectus the NASDAQ biotechnology index began to drop. Within a week, the index had sunk 10% and our shares had retreated by about 20% in price. This was a very difficult and unstable environment and we decided that with further discounts the dilution that would be required to raise our target amount would be too great. Thus we pulled the offer.

Our need to increase our financial resources had not changed, of course, and when the market settled, we were able to quickly strike and close on a private placement to raise $100 million we thought. Included in this financing, which was accomplished at a much higher price than we would have received from the public offering, was a half warrant, that with a full warrant would allow the buyer to purchase an additional share from the company at U.S. $25 per share. If exercised, the warrants will bring in approximately an additional U.S. $75 million for the company.

Having this money in the bank is very important for ID Biomedical shareholders as it reduces our financial risks going forward. No one knows how long financing windows will be open, but we do know that we will require additional financial resources to continue to move our programs forward. The combination of good clinical data from our FluINsure program and a very strong cash position put ID Biomedical in the enviable position of being able to control the development and commercialization of our products in a way which has the best hope of maximizing their value.

In terms of maximizing value, I would like to briefly discuss our partnering strategy for the FluINsure vaccine.

As I think most of our shareholders already know, we have been examining various partnering strategies and expect to announce at least one partnership for FluINsure by the end of the year. We are continuing to work aggressively to achieve our goal. Partnering is a form of risk reduction, but let's be clear. You cannot reduce risk without giving away some of the future up side from the partnered asset.

For many companies such as ID Biomedical, the partnering question really boils down to how much risk do we want to assume and how much of the asset's value can we retain. If we wanted to assume no further risk, we could turn the entire program over to a big company and accept a royalty and or other payments upon success. Conversely, if we wanted to assume all the risk, we would keep ownership of the program through commercialization and then produce, market and distribute the product ourselves.

Clearly we do not wish to partner in a way that puts ID Biomedical at either of these extremes. That is the main reason we did our recent financing. No matter what, ID Biomedical will continue to invest in our own programs, but we do not want to build a fully integrated company around a single product that is in clinical development.

Our primary objective in partnering the FluINsure vaccine is that we wish to secure a long-term influenza antigen source. Given our current capabilities, we must rely on a partner for that resource. In addition, we want to attain marketing and distribution experience and infrastructure. We also want to obtain regulatory and clinical development expertise on a worldwide basis from a partner or partners. And finally, we expect certain partners to provide capital so that we can share in the future development and manufacturing risks.

Achieving all of our objectives may be possible through a single worldwide strategic partnership with one company, or through a combination of alliances covering specific functions and or geographic territories. Partnering, or giving up a percentage of our future benefits, is not a decision to be taken lightly. While we believe we will be successful in meeting our partnering objectives by year end in deals that with will accomplish at least some of our stated goals, we will not be so consumed with the date of December 3st that we do not fully explore all credible alternatives.

The fact of the matter is getting the right deal, or combinations of deals, even if it's in January, is more important than getting the wrong deal in December. Having a strong balance sheet ensures we will have the resources and the staying power to get the right deal.

Finally, I'd like to talk -- touch upon Medimmune's recent announcement that they have been unable to sell a significant quantity of their live influenza flu vaccine, Flumist.

Explanations for this failure include the difficulty to distribute this product because it must be maintained frozen at minus 20 degrees centigrade. Safety concerns are, or perceived safety concerns, because this product is a live virus which grows in the upper respiratory tract. Price, because the wholesale price is approximately U.S. $46 per dose, and to the end user this translates anywhere from $65 to $100 for the vaccine.

A narrow label which only includes coverage for 5- to 49-year-olds, and timing, because the company and its marketing partner, Wyeth, did not get FDA approval in sufficient time to really launch the product for the 2003 flu season. Other than the marketing timing and label restrictions, which probably did not -- which probably did contribute to an uphill battle for Flumist, ID Biomedical's FluINsure product has significant fundamental differences to Flumist, and these difference actually address each of the very problems that were identified by Medimmune.

First, FluInsure is a non-live, (inaudible) based vaccine, so it doesn't carry the same risk profiles as live vaccines. Live vaccine products can cause disease in a small person of users. Additionally, Flumist can be transmitted through close personal contacts, which can be particularly problematic if you live or work with people that are immuno-compromised. There has also been concern that since Flumist is a live virus it could, in theory, mutate to a more dangerous form of the virus. Of course this, latter risk has never been seen. Because our product, FluInsure, is not a live vaccine, it does not carry any of these risks.

Second, FluINsure is not frozen. Our product is a liquid product being developed as a refrigerated vaccine that will fit into the standard distribution system for all vaccine products. Therefore, it could be widely available in pharmacies, physician offices, public health clinics and other places where flu vaccines are provided. This is of particular importance for an intranasal product because its use may be primarily consumer driven, and the consumer is looking for convenience and ease of use.

In terms of pricing, the eventually pricing of intranasal flu vaccines will be determined by the market which will be influenced by issues like reimbursement. Because of what we believe may be relatively lower cost of manufacturing and distribution, we expect FluINsure could be competitively priced for general market acceptance.

Finally, on our ongoing field study, we have enrolled patients from age 18 to 64 years of age and will seek to maintain this age group in our pivotal study. This age group includes the 50- to 65-year-old population which is recommended for routine flu vaccinations by the U.S. Advisory Committee for Immunization Practices. Additionally, in 2004 the company intends to begin testing in the under-18 age group and the over-65 population.

In summary, Medimmune's Flumist and ID Biomedical's FluINsure vaccine products are similar in that they are being developed to prevent influenza by needle-free delivery. In just about every other respect, the products are very different.

We look forward to continuing to update our shareholders on our progress.

Thank you, Dean. That's my report.

Thanks, Tony.

Vickie, I think we'll open up the call now to questions for Tony, Todd and Richard. If you could, please, identify yourself and the firm you represent.

Thanks.

Thank you.

We will now begin the question and answer session. To place yourself into the queue, please press star 1 on your touch-tone phone. If using a speaker phone, pick up your handset then press star 1. Please go ahead if you have any questions.

Your first question is from David Miller. Please go ahead.

Hi. Good morning, gentlemen. This is David Miller from Biotech Monthly

Good morning, David.

I want to talk a little bit about your partnership guidance.

If you were to acquire an antigen source, would that meet your guidance that will you get at least one partnership, or one facet of your partnering strategy, by year end?

Yes. Obviously we wouldn't stop there because, as we mentioned, our partnering strategy would include marketing and distribution and, ultimately, we would expect to get regulatory assistance on a worldwide basis. What we think would be -- if we can obtain our own antigen source, or a long-term antigen supply, then we would, of course, set about doing a marketing distribution partnership.

Whether that would also happen at the end of the year or by the end of the year, it's possible, depending on some path, but at least getting the antigen source would meet our definition.

Okay.

When are we going to see lab-confirmed data from this second challenge trial?

We're still under the impression from the clinical site that did the study, does the lab confirmed influenza work, and we are under the impression that that will be available to us this month.

And are you going to present that somewhere or just going to put it out in a press release or both?

Both.

I think how badly Flumist did in the overall population sales surprised many people, and I want to get some idea of how this is affecting your partnership negotiations going forward. And I know it really only happened yesterday, so it's kind of tough.

But I guess the way I want to ask the question is this: Do you wish you had inked your partnership, your big worldwide partnership deal, before the news about Flumist's poor sales, or are you glad you waited?

I don't think -- neither, really. Because it really isn't having any impact on our partnering discussions. I think from the point of view of the people that are in the influenza vaccine business, this did not come as a huge surprise. Perhaps -- no one thought that the sales were going to be as robust as people outside the industry were expecting.

And I think, as you saw from Medimmune's own announcement, and as Tony mentioned in his speech, the reasons for their failure are largely all addressed by the attributes of our product, and I think that people within the industry believed that intranasal flu vaccines are needed. People within the healthcare community, whether it's the government or HMO's or other payers would like to see more consumer option and immunization rates go up, and so the market segment for intranasal flu vaccines is clearly there.

I think would we're learning is, at least our opinion is that, the fact is -- the fact that it is a live product is probably the biggest issue, and obviously all of our partners already know that ours is not a live product so it's really not having any impact. You're right, it's been two days.

We're in discussion with between five and ten people, so I haven't talked to every single one of them in the last two days but we're not anticipating that that's going to be an issue.

My last question is, there are rumors out there that you are looking at some or all of acquiring some or all of the Canadian arm of Shire.

My guess is you can't talk specifically about that, although if you can I'd love to hear it, but I guess what I'm really looking to find out is whether the money that you raise, are you looking to acquire only a source for an antigen or are you looking to acquire maybe something more than that?

No, we're looking only to acquire a source of antigen.

We've heard a variety of different rumors about Shire. We have had really no discussions with them, with regard to an acquisition, and so I really, you know, wouldn't comment beyond that.

Okay.

Thank you very much.

David, I just make one further comment.

As you know, in my presentation over the last two years, I have questioned the wisdom of live vaccine products just because we just don't see many of them being introduced. In fact, the only successful live product that's been introduced in recent memory is the chicken pox vaccine from Merk.

What we're seeing, I was actually surprised as how poorly the Medimmune product did. I thought would it do much better. But I think in part we're seeing a much more highly educated consumer. And when you tell them what this product is, you know, I think they have a negative reaction. And as you know, I've been saying that for two years.

And as you know we've agreed. Any medical professional won't take it themselves because of -- for various reasons, is not going to prescribe it to their patients. So we agree.

Thank you.

The next question is from Mark Shunabrum. Please go ahead.

Hey, guys. How are you?

Hi, Mark.

Hi. Good to talk to you.

Couple, I guess, housekeeping questions.

First of all, what is going to be the primary end point in a pivotal trial of FluINsure? Not the going, but a true registration trial? What would be the pivotal?

It will be the same. That end point of fever plus any one of upper respiratory, lower respiratory, or systemic symptoms or signs will be the primary end point. Of course, laboratory-confirmed illness is going to be part of that.

As a secondary?

As a secondary. That's right.

Okay. Great.

And in terms of, you know, the worldwide partnership, forget about the antigen, but kind of a marketing and regulatory partner, I know you haven't given specific guidance, but would you expect to have that complete before the on-going field study data or have been compiled?

If we're going to do a single worldwide partnership, then the answer would be yes. If we're going to do -- if we're going do multiple partnerships, which would be more regional, then I think certainly in the United States where we're furthest along, I think the answer would be yes there.

In terms of other regions, probably not.

Okay. Great.

Then a financial question.

My question is, you mentioned that you may have had to issue 5.75, roughly, million shares originally, and that dilution was unacceptable to you. When I calculate the total number of fully diluted shares that you'll have to -- that actually should flow into your diluted share count following the recent deal, I get 8.7 million with the warrants. Is that correct?

Yes.

That's actually a little more dilutive?

Well, there's also a significantly more cash coming in when you do the fully diluted calculation.

What is your currently fully diluted share count?

I can get that for you. I believe it's around $42 million.

Fully diluted with options, employee stock options, and the half warrant, will be --.

I think it's about $48 million.

Okay. That helps a lot.

Thanks a lot, and a very productive quarter. Congratulation on the progress, and don't let Medimmune get you down.

Thanks, Mark.

Thank you.

The next question comes from David Morris. Please go ahead.

Yes, are you still expecting a DoD contract for injectable flu before year end, and as you stated earlier?

First of all, injectable plague.

Injectable plague. Yes, I meant that. I'm sorry.

Yes, we're expecting an additional contract with Dineport through the DoD that will be additive to our injectable plague program.

Good, good.

What about if you do acquire your antigen source, what percent -- what royalty rate are you expecting to achieve when you then partner with a big pharma partner, you know, to do marketing, et cetera? Ballpark.

I don't think that it would be wise for us to comment on the the exact rate. I can just say that what we're balancing here are various net present values of different opportunities.

We're seeking the one that obviously gives us the highest number, and I think what you can assume from the situation where we -- the only reason that we would be interested in acquiring the antigen for ourselves is that we expect that with that in hand, the back end revenues would be significantly higher than if we do a partnership when we don't have that as part of the deal.

In the recent RBC report, they had an assumption of a 40% royalty rate, and would you assume that with the acquisition of an antigen it would be above that rate?

I think it's fair for us to say yes to that.

Fine. No further questions.

Thank you.

The next question comes from Eric Lund. Please go ahead.

Hello. Good morning.

I just had few questions. Two regarding the field study that's going on now.

When and how will the results be presented?

The field study actually ends at the end of March, and we will present, in terms of a news announcement, as soon as we have the clinical results, we will announce them.

Obviously, we'll announce them in summary because we want to present that data at a scientific forum.

Okay.

And in terms of the variant strain that's out there, you talked a little bit about the impact on the study itself but does this, if the study actually doesn't show anything, what impact will this have on the whole program?

Well, I think I can answer that in that for our Phase III studies, we've put together the pivotal studies will take place between 2004 and 2006, so we have time within that period of time to do these studies.

So in terms of time line, it won't have any impact on the time line. This isn't a pivotal study, this is a field efficacy study. So I can't imagine that if, for some reason, we don't get statistically significant data that this would affect the time line of getting FluINsure to the market.

Particularly if that's the reason. Obviously, from a regulatory point of view, the safety trial.

Right.

Yeah, not in terms of the safety part, but I'm just thinking because of the seasonality of when these trials can be actually conducted.

Remember that we can conduct trials, both in the northern and southern hemisphere. There are very good clinical trial sites in South America, Australia, New Zealand, for doing flu trials so. We do have, in a two-year period we have four flu seasons.

Okay. Great.

The other question I had is regarding the Medimmune Flumist launch.

I think prior to what their results had shown, I think most of us thought that a strong intranasal market would have been established by the time that you guys get your product launched.

I guess, given their poor results, what do you foresee the market being once you guys have your product and does this dramatically change your partnering strategy towards, I guess, a distribution-type of deal, versus a fully marketed and distribution deal?

Well, I'll say from a partner point of view and I'll let Tony answer the other one, that this doesn't have any impact on what type of a partnering arrangement that we enter into.

I think that what we're hoping to capture, and I think this is still very, very important and possible for us, is that not that Flumist would have such a great dominant market position, because that obviously could hurt us a little bit in the end. But that they would have done and paved the way for market perception, market awareness, and obviously creating market demand for an intranasal product, and with the market demand part, you have to be a little careful about if they've got a completely dominant position.

Again, I would still argue with a non-live product it would not be an issue, but one could certainly envision a situation where they're spending several years paving market perception and market awareness, and that would benefit us, we'd still expect that to benefit us.

I think just to complete the answer to the question. I think if you look at what Medimmune said, Medimmune did not say that people didn't want to have an intranasal vaccine. What they said was, I didn't want to have a live intranasal vaccine, and I didn't want the inconvenience of getting this particular vaccine. I think that's what was said.

We know that people take medications intranasally. There's all sorts of intranasal medications. So people don't object to taking a medication intranasally, but I think the important concept here is that if you look at our product and you look at what was said in that conference call, it would appear that FluINsure is the answer to the issues that were raised, and we've believed that, that's why we started development of this product.

We knew that FluINsure was going to be in the market several years before us, but we also thought it was a flawed product. Mainly because it was live. But don't overlook the fact that, you know, that this is also a frozen product, and those two issues, I think, are the paramount issues.

Well, and I'd throw price in there as well. And I think no question, Eric, in the short term what's happened to Medimmune has hurt us. It's pretty obvious to everybody. But in the long term, boy, I think this provides a huge opportunity for us, because we do have a product that the consumer, you know, obviously we have to show that it's efficacious in these large clinical trials but I think this product is very acceptable to the consumer.

Great.

Thanks a lot.

The next question comes from Bruce Brewster. Please go ahead.

The question of Medimmune's FluINsure versus --.

Bruce, could you speak up a little? We're having trouble hearing you.

In the question of the acceptance of Medimmune's product, you put price as the least important consideration. I think it's the most important consideration. Because it costs ten times as much as the standard product.

You say that you're competitively priced for general market acceptance. What does that mean? Does that mean your product will cost no more than twice the existing competitive flu shot?

In this environment of HMO's and cost containment in the medical area, I can imagine that anything over twice the price of the existing product will just be rejected by medical insurance systems out of hand.

So what does competitively priced for general market acceptance mean?

First of all, we're not priced at all. We don't have a product, and we haven't priced the product. So what we've said was, is that our cost of manufacturing and distribution, we believe, will allow us to competitively price the product.

We do think price was, or is, an issue for Flumist. We don't think it's as big a concern as the live product aspect. And I think the fact that they were able to get a significant amount of reimbursement, even late in the season for a new product, was very, very impressive.

What does competitively priced for general market acceptance mean? That's what you've quoted as your pricing strategy.

That means that we can competitively price the product for what the market will accept.

We know the market -- and but what is that?

Medimmune thought it was more than ten times -- worth more than ten times the standard price.

What do you think?

Okay, Bruce, let's go to the intramuscular, because there's some things that you're wrong on.

If you go to the wholesale price of the intramuscular product, that wholesale price is about $7.50 per dose. Then there's a user fee that's attached. So in the end run, and I know in Canada this is true, and I've seen pricing in Seattle in these clinics they set up, you're paying somewhere around $25 for the intramuscular injection. So there's the price of the product, then there's a user -- there's an additional fee to the user.

So in terms of the intramuscular product, we will be more expensive to manufacture than the intramuscular product. But not significantly more. Our device costs more, so that's part of it. Then there's going to be a user fee as well on our device.

But the issue is, is that will people be willing to pay a premium for intranasal? And I don't think there's any expert in this world who said no. You might argue about how much a premium, so twice as much, so will the consumer, instead of spending $25 U.S., or $20 U.S. for the intramuscular, will they be willing to spend twice as much? I think that's probably true, all in.

Yes.

And can you bring your price in at only twice as much as the intramuscular?

I think that it is far too premature for us to have this conversation, but we believe that we can be competitively priced based on what it costs us to make the vaccine and what we project at scaled-up costs and with raw material costs and the other various components that we will negotiate, we estimate that we will be competitive in terms of cost of manufacturing.

With Flumist. But will you be competitive with intramuscular?

I think Tony already addressed that.

He addressed that by saying that the price that -- the wholesale price is $7 plus the administration fee would bring it up to $25 for an intramuscular, and then you will price yourself based off that. But --.

No --.

If you don't want to state what your price will be, I will tell you that I don't think you can get much more than double the competitive price. For the intramuscular.

Now, if you are comparing it to Flumist, certainly, you can be -- you must be competitive with that. But -- . Okay.

The second part of my -- I have another question, since I can't hear an answer to this question. And that is, when you're going through the approval process for your product, do you have to get approval for the strain of flu that you will be using?

The strain of flu that you use, and you use three strains in every vaccine, is actually not determined by us, it's determined by health organizations that monitor these strains. And every manufacturer must include those strains.

And you have to get approval for the current strain.

Everyone gets -- once you have FDA approval for your product, which in our case would be the FluINsure product using a reformulated intramuscular vaccine intranasally, that's your primary approval and licensure, let's say for the United States. Then, each year we will be like every other flu manufacturer in that when the new strains come out, we would be required to use those strains, and we would have to go through, just like everyone else, tall various regulatory steps that you need to do to put that on the market in the next flu season.

But no additional steps because it's intranasal?

We would have to go through no additional steps.

All right. Thank you.

Thank you.

The next question comes from James Perkins. Please go ahead.

Gentlemen. My name is Jay Perkins.

How are you?

Good.

Is it true that our proteosone technology could be used to convert any subunit vaccine in a nasal format, and if yes, are there any other companies that have similar technology?

I don't know that we'd go to any, but certainly we believe that this technology is ideally suited for vaccines, subunit vaccines, against respiratory organisms.

Remember that the benefit of this technology is that it gives you immunity on the respiratory surfaces. Nose, throat, lungs. Therefore, you know, it's likely to be a very good technology to protect against organisms that attack you through nose, throat, and lungs, like influenza. So that's how we view the breadth of the technology.

Yes, it may have other benefits, or could benefit other subunit vaccines, but that certainly isn't our focus. We're focused on respiratory organisms.

Okay.

Thank you.

Thank you.

The next question comes from John Smith. Please go ahead.

Hello.

Hello, John.

Hi.

I have three questions, I guess, gentlemen.

First one is related to, I guess, the general discussion that's been going on with Flumist, and it relates to market studies that may indicate the potential size of the market now that Flumist has proven itself to be a dead product in just about every aspect of whatever they thought the perceived value would be.

And a follow-on related to that, an evaluation or summation on your part related to the value chain to delivery, which I think may deal with some of the issues that a previous gentleman had raised.

So what was the question exactly?

Well, now that -- it's my understanding that perhaps you were expecting Flumist to pave the way, perhaps done some research, living off some research they had done as to what the addressable market for the nasal, or non-injectable flu vaccine market would be.

My question is, I mean, given that they were so wrong in every aspect of that product, does that entail you folks now to actually have to go back to square one to try and determine what the addressable market may be for non-injectables based on whatever labeling and market you're looking at? And then, following on to that, the value chain to delivery of your product to the various, you know, obviously they spoke of Wal-mart, which is more of a direct-to-consumer approach. They spoke through HMO's, which is an intermediated approach, so anything that you could say in those areas?

I think in terms of the market size, I don't think the market size for intranasal flu vaccines has changed because of Medimmune's announcement. I think, you know, their -- you know, their conference call really addressed what the problems were. The problems were specific to that product. There's no suggestion that because of that product's failure, that people now don't believe intranasal vaccination for influenza is a good idea, but you have to have the right product.

So in terms of market size, I don't think that's changed, and I suspect if you talk to Medimmune or Wyeth, they would say the same thing. There's a need for a product in this area because you have a large contingent of people who won't take needles, yet public health has the objective, by I think 2010, of getting 150 million people in the U.S. vaccinated per year because flu is an expensive and deadly illness. Particularly for the elderly. And certainly in the pediatric age group that, you know, a needle may well be unacceptable for broad useage of the flu vaccine in those age groups. Now there are recommendation for young children.

So I don't think the market has changed at all in that regard.

And then I think the other question in terms of value added to the consumer, or -- and when you said may address the other person's question, I'm not sure I understand, what you mean is cost of goods sold.

Our belief is, and from what we hear within the industry, that they have a very high distribution cost, which would make sense because of the frozen nature of the product, the cost associated with that aspect of the product obviously we would not incur.

Okay.

Then, Tony, just to follow up, so we should be able to take away that the market is still the addressable market.

Yes.

And that --.

The proviso being, with the right product.

Right.

And I have no doubts in my mind that this is the right product, and perhaps Flumist was desperately the wrong product. But then the attribution of potential Flumist market, whatever they thought they would grab, would also then be something that is pretty much FluINsure product now.

Yeah, I think FluINSure can address this market, absolutely.

Okay.

Second question I had was related to -- and I guess David Miller had brought it up earlier. Shire antigen, the financing portion that was potentially attributable to strategic acquisitions, and anything that you can lay out in that regard that, I guess, may or may not happen, but would not impact the progression to a partnership for FluINsure.

Well, I think what you're asking is if we were to not acquire Shire, which I guess is the most likely scenario, would that impact our partnership plans, and the answer is no. It would have no impact on our partnership plan.

If we were to acquire Shire for whatever reason, would that impact our partnership plans? I suppose it would in that they do have flu antigen, and having a source of flu antigen would work into a model of partnership that we would like to pursue, but -- if that's what you mean.

Does that make sense?

It does, and I guess my concern would be, if I can adequately express it, is holding up the partnership of FluINsure related to a more -- much more complex transaction that bundled the antigen in potentially with a number of other aspects that may be valuable to the company, but may be a different issue than antigen partner FluINsure.

Well, we would, and I think that's what Tony was talking about, you know, December versus January, we would -- I wouldn't use the term hold up, but we would pursue having our own antigen source if that looked reasonably possible and would then allow us to do a whole bunch of, as you said, more complex transactions, but would be more valuable to the company? We would do that.

By more complex transactions, what I would mean though, is different marketing, distribution, and other partnerships throughout the world.

If what you mean is, would we hold up some partnership because we're trying to acquire a company and the only reason we want the company is for a flu antigen and there's a whole bunch of other complex things that would go along with that, would we hold everything up just for that? Probably not.

Okay. Last question.

This quarter's been a wild ride for shareholders. The dizzying sort of drop in the last nine weeks. From your folks' perspective, is there anything unusual going on? And I don't even know whether you can address this, but I'm a retail investor, so I'll ask the question.

Anything unusual that may be going on other than the basic sort of toing and froing of market and selling and buying that we should or may be made aware of and, related to that, I guess, the issue of investor confidence, and do you think that this is -- this down draft has been related to the execution of the business plan by the executives?

I'll start by saying that we were caught in the updraft of Medimmune's launch of flumist. Our stock reached high levels because of Medimmune. We took the opportunity, because our stock was caught up in that draft, of financing, I think, everyone would agree, doing a very smart financing at a high share price. No one predicted that Medimmune's product would be this bad of a bust. I don't think anybody predicted that. Certainly no analyst that I read predicted that.

And so we are now caught in the down draft, and unfortunately, we're tied to them for the short period of time because we're the only two companies that are developing intranasal approaches. And I think as people become rational and think about the two products and recognize that these product are not similar in any way, and then take them, the information they learned from the Medimmune conference call, apply to the ID Biomedical, I think what's going to happen is they're going to recognize that ID Biomedical's opportunity with FluINsure is as great as ever or even greater because we may be in the end run, the only product in the marketplace.

With regard to the execution of the business plan, I'm trying to think of what, over the last three or four years even, we have'nt executed on.

Oh, and, Todd, I would say this. Up until this last financing, the execution has been really quite good.

What do you mean by up until this last financing? I think the execution of that financing -- I think anybody who would look at it would say that that was a very smart thing to do at that time. Because as you know, in the biotechnology sector now, it's very hard to do a financing. It's changed that rapidly.

And I'm, quite frankly, not qualified to speak on would generally is going on in the biotechnology.

The sector has dropped from being in the low 800's to the 700's now, and so, you know, there's been a dramatic change in the sector.

And that's -- that, I would, agree with you, Tony. I guess the only issue that I can point to is the expectation that -- and in my mind I'm trying to' quake the expectation for partnership.

By year end. Remember what we said.

Right.

To the dramatic down draft in the stock price, and what may or may not be underlying that.

I would say, in response to that, that the down draft in our stock price has nothing to do with the partnering discussions.

Remember, we said that we expect by the end of the year to have a strategic relationship. And so I just can't see how anybody today can say that somehow we have not executed on the business strategy.

I think we've done exactly what its shareholders would expect of a management team. They expect us to look at all options, they expect to us maximize the value of these products. If we didn't do that, that would be a big problem, in my mind.

Okay.

Very good, guys.

Glad you reaffirmed the partnership issue. Very glad.

That's all I had.

Thank you.

Thank you.

The next question comes from Filicia Blank Please go ahead.

Hello.

Hi, Filicia.

Hi Tony and Todd.

Just a couple of questions to follow up on.

First of all, just kind of a technical question on your financials. You said R&D were $6.8 million in the quarter, net R&D?

Yes.

Can you give any guidance of what you expect in Q4 and then going forward into 2004 as you ramp up the clinical trial cost?

In Q4, I would expect similar R&D dollars as we saw in Q3, might be a little bit high we are the cost of the field trial.

I would also expect those costs to continue through Q1, but after Q1 I'd expect them to come down just a little bit as we won't have the field trial, we'll have some smaller bridge studies but we will be ramping up the manufacturing portion of our business.

Okay. Great.

Then on the potential antigen sources, can you give me a feel for, you know, who the main manufacturers are out there that could be potentially considered as partners?

I don't think it would be appropriate for us to name off the companies to be potential partners.

Okay. Then maybe he'll ask a slightly different question.

You said that you're on track for a partnership deal by year end. I think Tony mentioned that depending on what type of deal you do could potentially go into January.

Could you just clarify or confirm that you would expect at least one part of whatever arrangement you're doing to be where the end of the year?

Yes, we still expect at leaf one part of whatever we're doing, and one part might be everything, by the end of the year I think what Tony said is we want to do the right deal.

Right.

And if that means doing it, you know, in January instead of December 30th, then that's what we'll do. We don't have a gun to our head.

We certainly -- people that we're talking to certainly know that we expect this to be done by the end of the year, and I don't think anybody has a big problem with that, but, you know, stuff happens, and I think we're just -- that's the caveat that we're throwing out there.

Right.

And generally speaking, all other things being equal, if you can say this, would your preference be to have a global marketing deal rather than regional one?

Well, all things being equal would suggest that you could get the same amount of money

Right.

And, you know, hey, we're all for doing as little work as possible. If we can do one deal and get exact same amount of money, that's fine. We don't envision that that -- we don't believe that that's the case.

We believe that we can get, we think, better deals by doing multiple deals. The other advantage to doing multiple deals obviously is that there may be companies that are stronger in one region than in another. I believe there's probably one company that is either number one or number two in most of the markets that they serve. Not all markets, but most of the Mark that they serve.

For every one else, they may be number one in Canada, they may have no presence in the United States, there may be a party that's high in the United Sates that has very little presence in South America. There are completely different companies in Japan. Obviously, there are European companies that are very strong that may not be strong in the United States, so that factors into the situation for us as well, and that makes it a more complicated, but we think more lucrative, if we can pull all this together, and we have confidence that we can, a more lucrative series of arrangements for us.

We're simply trying to maximize value.

Okay.

And finally, with your clinical trials you talked about starting studies with the younger age groups.

Would you expect to include either older than 64 or the younger age groups in your initial regulatory application or do you anticipate that would come after your initial filing?

That will come after. We're -- the way flu vaccine approvals work, we'll have to take this adult age group right through to approval, then on a separate track, take a pediatric age group through to approval, and on a separate track again, take an elderly age group through to approval.

So likely your first approval would be 18 to 64 assuming all results are positive?

Exactly.

Thank you very much.

Thanks, Filicia

Thank you.

The next question comes from Ian Houston. Please go ahead.

Hello, Ian.

The easiest question we've so far.

Ian?

Next question?

The next question comes from Tanya Miller. Please go ahead.

Hi this, is a technical -- hello?

Hi, Tanya.

Okay. I just have a quick technical question. Something I've been hearing out there.

What is the volume of FluINsure?

The volume of fluinsure is 140 microliters, so it's a below that 150 microliter amount.

As you probably are aware that, if you go above 150 microliters, it's known that you get dripping posteriorly, so typically you taste the product, and you get dripping anteriorly. Those are the side effects of using more than 150 microliters.

Okay.

And I guess to take that a little farther, in the under-5 population --.

I'm sorry?

Can you hear me?

Yes, go ahead.

In the under-5 population could the advantage with regard to the wheezing side effect that Flumist elicited?

I think the lower the volume you use, particularly in the pediatric anal group, the less chance you have of having a product either in the back of the throat or inhaled into the lungs so that could certainly be a huge advantage against wheezing, because wheezing comes from irritation of the respiratory lining.

Okay. And then one more question related to that.

As far as you know, how much of the FDA's decision to not approve on this population was related to that side effect or how much of it maybe was related to the live -- the fact that Flumist is a live product, or can you tell me what you know about that?

Un, I don't know. Both those things have been mentioned as issues with the regulators, but I can't really tell you how much was, you know, this and how much was that. I think there is a real concern about using live products, particularly in immunologically live children. Children who have never seen a flu before.

Because, obviously, first of all, they're the hardest to vaccinate, but secondly they get an inordinate number of complications from influenza. I think there's an issue on both sides of that.

Okay.

Well, thank so you much for your time.

Thank you.

Thank you.

The next question comes from David Ing. Please go ahead.

Good morning, David.

Just a couple of questions, regarding the long-term supply for antigen would you categorize that as a purchase of around, like less than $20 million or more than that, like how expensive are we talking about?

We're not giving any guidance on that.

The second question is regarding the strategy of acquiring a long-term supply.

Imagine talking to some existing vaccine players out there and who already have the antigen supply. By securing your own source of supply, would this basically take away some of the profit sharing from the potential of large pharmaceuticals partners? And would that be detrimental to the partnership for a marketing relationship?

If it would be detrimental then I guess it would be the last thing that we would be pursuing.

Does it take away the profit sharing from the big pharmaceutical partners?

I don't know what you many by big pharmaceutical partners. If you're talking to a big pharmaceutical partner who does not have flu antigen, we could not do a deal with them unless we had flu antigen.

If you're talking about a vaccine company that currently has flu antigen, then I would expect that the fact that we had our own flu antigen would change the economics of whatever partnership that you may be talking about.

And would you envision a potential future marketing partner to be also the manufacturer or would you envision a separate manufacturer of the FluINsure down the road?

If we can not secure our own antigen source, then the partner will be the manufacturer, the marketer, the distributor, the co developer. There will be no other way for to us do a partnership.

And if you can secure a source?

And if we can secure a source, we have a variety of different options available to us.

Question regarding the cost of manufacturing.

I think Medimmune disclosed in the conference call that the cost to manufacture Flumist is more than $10 U.S. per unit unit if the production is less than 10 million doses per year.

And if you compare, using that number as a reference, and if you can, again, just maybe for a rough number, if you can scale up FluINsure down the road would you be talking about like a much, much smaller number than 10, like maybe even less than $5 per unit with the production of FluINsure?

I think that, again, it is very premature for to us start talking about cost of goods sold.

I think that, in general, we feel very comfortable with the various numbers that are being thrown out in terms of, you know, can we be competitive below $10, et cetera, but again, it's -- I think it's too early for us to talk about that.

Could you comment on the current cost of production for the injectable flu vaccine out there? Is it like less than a $1 U.S. for production out there right now this

Well, with the proviso that we we're not in the injectable flu vaccine business, so I think it might be a bit presumptious for us to start throwing those type of numbers around. In fact, I think it might be so presumptious it really wouldn't make any sense. We have numbers but I don't think it really adds to the FluINsure equation. I mean, it doesn't help you analyze FluINsure.

But you do say that -- you can comment that FluINsure, the cost will be definitely lower than Flumist in terms of the cost of production, if they can both ramp up to the economy of scale?

Is that like correct?

If we expect, given our current estimates, that we would be below $10, if that's what you're asking. Absolutely.

If you compare FluINsure versus the traditional injectable, could you claim that down the road that it could be potentially be a saver, flu vaccine versus the traditional injectable?

Steve this, is Tony responding to this question.

Remember that they are virtually identical product. We use the intramuscular product in bulk as our base reagent. So we would expect that the only difference that you would have, and as you know, the one thing about the intramuscular vaccine is it's very, very safe. Like any subunit vaccine, it's very safe and has very few side effects.

Similarly, we would expect our product to be very safe with very few side effects and that's what we found in our clinical trials to date. So the safety profile would be similar except you wouldn't have a sore arm for three days. I just got my flu injection.

Right.

On the flip side, Tony, the addition of the proteosone, I guess, membrane, or the component to the antigen to arrive at FluINsure, would that have any safety concerns, versus the traditional injectable?

Well, that's what we have to do the clinical trials for.

Right. And in the roughly 500 people that have got FluINsure so far we haven't seen anything.

Final question, Tony, the use of proceeds from the most recent financing, the $100 million U.S. financing, would you say that only a small portion would be used in the upcoming antigen purchase? It would be more likely to be used in ongoing clinical development rather than a one-time purchase?

I think it's early for us to say that, but I think that would be currently our expectation, yes.

That it will be used more likely for the upcoming years of operating expenses -- expenditures?

That's right.

Thank you.

Thank you, David.

Thank you.

The next question comes from Adam Levine. Please go ahead.

I had four quick questions.

I've been with -- along with you guys for over two years. I believe in what you're doing.

First of all, substantiating proteosone platform has to be a strategic goal. What's it going to take? Is it going to be the pivotal study from FluINsure, is it also going to include streptavax, before this platform is recognized for what you hope it is?

I think, getting FluINsure through pivotal studies will certainly help the platform. In addition, as you know, I think we have 15 ongoing programs with academic research centers and the U.S. Military using this technology in a variety of different ways.

So obviously, the more we use it and the more success we see and I think you remember, Adam, the data we published from the intranasal plague vaccine that we were working with the DoD on where we had 100% protection and it worked very well. Granted, it was in an animal model, but we certainly are developing the platform and you're correct in assuming that as FluINsure goes, so are you also developing the platform for a number of applications, and our pre-clinical programs are also doing that.

Okay.

I guess where I'm coming from, if you guys are going to be perceived as a real significant threat to major players out there, now that you have the cash what business-related risks do you see?

What risk? Missed that, Adam.

What business related risks do you see as opposed to -- I mean from a technical side you're attacking all of that. But considering the -- how you're going to be perceived by your future competitors, now that you have the cash in the bank from this recent financing, where do you see the business-related risk?

Well, I think that, let's be honest. The cash in the bank has only changed the financial risk is the company. That addresses the financial risk.

We still have a considerable amount of work to do in all the other areas of risk that face companies like ours. And that work needs to be done. It's just that we have the money to do that.

All right.

Do you see any intellectual property threat to the proteosone platform, developing it?

No, we don't.

Great.

And with an opportunity cost of billions, potentially, I thought I heard earlier a three-year window to meet the regulatory requirements for NDA in the U.S.

Is there, first of all, an opportunity to get fast-tracked, perhaps additional FDA hurdles now that Flumist has so miserably failed, and can we shorten this window by attacking other market, perhaps Europe?

Could I answer that, Adam? This is Tony.

With vaccine products it's impossible to get fast tracked. And the reasons being that vaccine products are used in perfectly healthy people only so the regulators would be very loathe to speed up, you know, the approval of vaccine products.

And I think, you know, the primary market for these production is North America, let's just be clear about that. We have to go after the primary market. Yes, you may be able to get quicker approval in some small country, but that is going to be more hassle than it's worth. We don't have expertise in that area, we have expertise in terms of our regulatory and clinical team of getting approval in North America.

And thank you very much, gentlemen.

Thank you.

Thank you.

The next question comes from Eric Lund. Please go ahead.

Hi. Just a follow-up question.

Regarding your feasibility of doing another study in southern hemisphere, has the process been initiated and if not how long would that take to get up running?

Eric, we haven't initiated the process. We know the clinical trial sites that do these studies, and we're evaluating them as we go forward.

Okay.

And how long would that take to get going if you guys needed to do that?

Can get going very quickly because there are established sites that other flu manufacturers have used in the past

But would you have to file an IND in those (inaudible)?

Yes

Thank you very much.

I think we really have time for one more question.

Yeah. Unfortunately I have to catch a flight to Baltimore.

The last question comes from Murray Augy. Please go ahead.

Hi guys. Hi, Tony.

Just to be fair on -- just on the regular -- just the general point on Flumist launch. The marketing picture that they offer the consumer, when they launch the product, is about convenience. And it was nothing but -- not convenience when they offered it on the market by not having it in many areas like New York City. They didn't have anyplace to give it in New York City. So they concentrated on the convenience side and it wasn't convenient for the consumer.

It looks like next year Flumist will be offered and the marketing strategy for Flumist will be based on the better profile that the product will have against normal vaccines. Meaning that being a live vaccine offers you a faster first because of, it's nasal it will offer you a faster protection, and it's also offers you a longer period of protection against viruses compared to normal vaccines.

Now, this will be a little bit tough for you guys because your product is based on a subunit vaccine, meaning that, you know, so far we haven't seen that the FluINsure will have a longer term protection against viruses compared to Flumist. Do you think that this strategy, by showing the comparison between a live vaccine and a subunit vaccine will hurt you when you launch your product, and maybe let me know how you're going to come to that strategy.

I would say first of all, that is speculation that you have longer protection with this live product. You're not seeing Medimmune saying, oh, you need only one spray, and that will last you three years. They're saying you're going to need your vaccine each year.

Similarly, our -- how long does immunity have to last? Immunity only has to last the flu season. You're going to have to get a new vaccine each year. So I just don't see that as an issue.

The live part is the big the live part is the big issue because that is the issue that Medimmune identified with the consumer. That's the problem. People don't want to take live viruses of any kind as a therapy.

Don't you think the biggest problem this season was the distribution channel for Flumist and not being a live vaccine? Because it wasn't offered in many places, and that's why the product wasn't selling. That's what they said.

I agree with you. I think that the distribution was a major issue. But in those pharmacies that did have it available, the major issue was that it was a live product.

Do you think if they fix the distribution channel next year you will have a potentially good season for them and by that time when you launch your product, you will be facing a higher competition from what is actually -- what we are actually seeing right now from flumist?

We would certainly anticipate that when we launch our product that Flumist will be doing better than did it this year, if that's what you mean. But again, what has been the reason that we developed this product was not to be a me-too, other intranasal flu product. It was because we have a non-live product.

I suspect they will get their distribution system worked out. I suspect they may even get rid of the frozen nature of the product. I suspect that they'll get a very effective marketing campaign. I suspect that they'll develop the right pricing strategy.

But the bottom line result is that we have a non-live product, and we will hopefully be hitting the market with that as our lead competitive advantage.

Okay.

Thank you, guys.

Thank you.

Vickie, that's going to conclude our call today.

I'd like to thank all of -- everybody that participated on this call and everybody who listened. And wish you a good day.

Thank you very much.

Thank you.

This concludes today's conference call. Please disconnect your lines and have a great day.