葛蘭素史克 (GSK) 2004 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the ID Biomedical Corporation year-end and 2004 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). I would like to remind everyone that this conference call is being recorded on Wednesday, March 16, 2005 at 5 PM Eastern Time.

I will now turn the conference over to Mr. Dean Linden. Please go ahead, sir.

Thanks, Joanne. Good afternoon, and thanks for joining us to discuss ID Biomedical's very successful year ending December 31, 2004. My name is Dean Linden, Director of Corporate Communications. I am joined today by Dr. Tony Holler, ID Biomedical's Chief Executive; Todd Patrick, the Company's President; and Richard Bear, VP of Finance and Administration.

Today, we'll begin with a report on the Company's 2004 year-end financials. Tony will then take us through a general overview of the Company's activities during the year. Finally, Todd will update the Company's activities since year-end.

In a moment, I will turn the call over to Richard. However, first I need to make a brief comment regarding forward-looking statements. The information in this conference call contains so-called forward-looking statements about ID Biomedical's expectations, beliefs, intentions or strategies for the future, which may be indicated by words or phrases, such as anticipate, expect, intend, plan, will, we believe, ID Biomedical believes, management believes and similar language. All forward-looking statements are based on ID Biomedical's current expectations and are subject to risks and uncertainties and to assumptions made. Important factors that could cause actually results to differ materially from those expressed or implied by such forward-looking statements include the Company's ability to successfully integrate the Shire vaccine business, the Company's ability to successfully complete preclinical and clinical development of its products, the Company's ability to manufacture its products, the seasonality of the flu vaccine business and related fluctuations in the Company's revenues from quarter-to-quarter, decisions and timing of decisions made by health regulatory agencies regarding approval of its production for human testing -- products for human testing rather, the Company's ability to enter into distribution agreements for its products and to complete and maintain corporate alliances relating to the development and commercialization of its technology and products, market acceptance of its technologies and products, and the competitive environment and impact of technological change and other risks detailed in the Company's filings with the Securities and Exchange Commission. ID Biomedical bases its forward-looking statements on information currently available to us and assumes no obligation to update them.

With all that said, I will turn the call over to Richard Bear to report on 2004 year ended financials.

Thank you, Dean. The Company's results from operations for the year ended December 31, 2004 include the activities of the Shire acquisition on September 10, 2004 to December 31, 2004. All amounts herein are expressed in Canadian dollars unless otherwise noted.

For the year ended December 31, 2004 the Company recorded revenues of 53.7 million with a net loss $39.7 million CAD or $0.94 per share. For the year ended December 31, 2003, the Company recorded revenues of $6.8 million CAD with a net loss of 31.8 million or $0.89 per share. Included in revenue are product sales for our two marketed products, research and development contract revenue, deferred licensing revenue and other revenue. The Company recorded revenue from our two marketed products, Fluviral and NeisVac-C, totaling 36.1 million for 2004. And this revenue primarily relates to the sales to the Canadian government. There was no product revenue in 2003.

The Company recorded research and development contract revenue in the amount of 13.4 million for 2004 compared to 4.1 million for 2003. Research and development contract revenue includes revenue recognized as a result of Shire funding facility to support the development of the pipeline vaccine candidates acquired from Shire. Revenue recognized as the result of the finance facility totaled 6.8 million for 2004. The Company determined that these amounts are appropriate to recognize as revenue, since the amount in base of repayment of these advances are not known. There was no requirement to repay any advancements if the pipeline vaccine candidates acquired from Shire are not successful.

Other research and development contract revenue totaling 6.6 million was recognized in 2004 as a result of the agreements with Dynport Vaccine Company for the development of an antigen for injectable subunit sleg (ph) vaccine.

The Company recognized deferred licensing revenue of 2.7 million for 2004 compared to 2.7 million in 2003. The amortization of deferred licensing revenue does not result in additional cash to the Company. The Company also recorded other revenue of $1.5 million CAD for 2004. Other revenue consist primarily of the pandemic revenues fee to maintain a state of pandemic readiness against an influence of pandemic as required under our agreement with the Canadian government and other fees destroying (ph) to distribute vaccines under our agreement with the Québec Ministry of Health. There were no other revenues in 2003.

The Company recorded cost-to-product sales of 21.4 million for 2004. The cost-to-product sales include the expenses related to the production and distribution of Fluviral, the distribution of NeisVac-C and other product related costs. There were no cost-to-product sales in 2003.

The Company recorded research and development expenses of 48.5 million for 2004 compared to 31.6 million for 2003. The increase in research and development expenses is a direct result of the Shire acquisition, the cost of advancing our lead products and clinical development, and the funding of our research and development programs. Also included in research and development expenses, a stock-based compensation totaling 1.9 million for 2004 and 1.2 million for 2003.

The Company benefited from research and development tax credits and grants in the amount of 2.8 million for 2004 compared to 2.3 million for 2003. Included in research and development tax credits are amounts received or receivable from technology partnerships -- Canada, National Institutes of Health, and provincial government investment tax credits.

The Company recorded selling, general and administrative expenses of 15.8 million for 2004 compared to 7 million for 2003. This increase is primarily the result of the selling and administrative organizations acquiring the Shire acquisition. Also included in the selling, general and administrative expenses, a stock-based compensation totaling 2.6 million in 2004 and 500,000 for 2003.

Investment and other income are comprised of foreign exchange gains and losses and interest income. The Company recorded a foreign exchange loss of 3 million for 2004, as compared to 100,000 for 2003. The foreign exchange losses directly related to the Company's investment in U.S. dollars prior to the close of the Shire acquisition to satisfy the U.S. $60 million obligation of the acquisition price.

The Company recorded interest income of 2.6 million for 2004 compared to 1.6 million for 2003. The increase in interest income over 2003 is a result of the increased levels of cash and short-term investments resulted from the Company's 2003 financing activities.

Interest expense in the amount of 1.2 million was recorded for 2004 compared to 100,000 for 2003. The increase in interest expense is a direct result of the interest accruing on the flu advancements received under the Shire funding facility.

The Company had cash and short-term investments of 105.1 million at December 31, 2004, as compared to 156.2 million at December 31, 2003. Including in cash and cash equivalents is 36.1 million held at escrow to satisfy the U.S. $30 million payment to Shire on September 9, 2005.

The Company's networking capital was 53.7 million at December 31, 2004 compared to 149 million at December 31, 2003. The decrease in networking capital is a result of the Shire acquisition and the funding of the Company's research, development, manufacturing and clinical trial related expenditures. Networking capital does not include 21.5 million received on January 10th from the Shire funding facility or approximately 50 million received on March 3, 2005 for the sale of NeisVac-C at two facilities acquired from Shire. The Company will end Q1 2005 at approximately 100 million in cash and cash equivalents.

The Company had previously guided that 2004 total revenue would be approximately 62 million with a net loss of 27.5 million. This guidance assumed the Company would record 23.4 million in contract research and development revenue, as a result of the Shire funding facility's support the development of the pipeline products acquired from Shire. For 2004, the Company recorded 6.8 million in revenue related to the funding facility. The guidance provided was based on expected level and type of spending of pipeline eligible expenditures and how the Company would allocate funds received during the interim period from July 1, 2004 to closing on September 9, 2004. The Company required much less funding than was originally forecasted, and most of this funding related to capital expenditures. Additionally, the funding received during the interim period was allocated to the purchase price as opposed to being recognized as revenue. These differences negatively impacted revenue and net income but did not have a negative impact on cash as of December 31, 2004.

That concludes the financial highlights for the year ended December 31st, 2004.

Thanks, Richard. I will now call on Tony Holler to get his report on the activities of the Company during the year 2004.

Thank you, Dean. 2004 was a remarkably year for ID Biomedical. The year was highlighted by the acquisition of Shire's vaccine business and as a direct result of this acquisition, the signing of distribution agreements with three of the largest flu vaccine distributors in the U.S. market. These transactions have transformed ID Biomedical from a research and development company into a fully integrated vaccine company.

The other major accomplishment, which tends to be overlooked because of the Shire transaction but is also very important in terms of building value, is the advancement of our two lead programs in clinical development, FluINsure and StreptAvax. In terms of the Shire vaccine assets we acquired, the most valuable of these assets is the modern production facility and experienced production personnel in Quebec, where Fluviral, our injectable flu vaccine is manufactured. Recent issues with few vaccine supply in the U.S. market highlight the potential value of our facility.

Prior to the acquisition, Shire had just begun an expansion of this facility in order to increase production and access international markets. This expansion is expected to increase annual flu vaccine production from 25 million to approximately 50 million doses. We expect to have this facility expansion complete and licensed in time to manufacture for the 2009 flu season. Prior to that, we will carry out production using the non-expanded portion on the Québec City facility as well as an upstream processing facility we have in Laval, Québec.

The most attractive international market for flu vaccines in terms of volume and price is the U.S. market, where wholesale prices and number of does is sold have risen dramatically over the last decade. And only two suppliers service this market with injectable vaccine.

The current market for injectable vaccine is approximately 80 million doses, but demand has often been limited by supply. Current suppliers to the U.S. market are at or near capacity at 80 to 90 million doses. Health authorities in the U.S. have set a goal to have at least 150 million Americans immunized against the flu each year by 2010.

Getting ourselves positioned to enter this market was one of our key objectives. Expanding our production capacity and receiving FDA approval would not by itself assure us of market share, even if the market continued to expand. Thus, to really execute on our strategy required putting in place a strong distribution system to ensure we would capture a fair, if not someday a leading share of the market. The most realistic opportunity we believed was partnering with existing distributors, who would be supplying their customers for many years. So in the summer 2004, we set out what we thought was an ideal combination of partners and approached these parties to arrange in essence a syndicate of partners.

The timing was right as many distributors of flu vaccine were seeking long-term suppliers, not only to help them grow their business but also to diversify their supply of product. Our commitment to enter the U.S. market coupled with our track record for successfully producing quality product for several years in Canada together with the fact that our modern flu vaccine production facility was already well underway towards expansion made us the ideal partners for many U.S. distributors. Although every party we talked to was already keenly anxious to increase their supply of product and to diversify their suppliers, Chiron's failure to deliver flu vaccine to the U.S. market in late summer, early fall even further highlighted the urgent need for these parties to work with additional manufacturers.

These factors culminated in our signing distribution agreements with our preferred syndicate of partners, who happened to be three of the largest flu vaccine distributors in the United States, and parties, we believe, are best positioned for growth. Henry Schein, AmerisourceBergen, and McKesson have each agreed to purchase a minimum number of doses each year beginning upon FDA approval, so long as that occurs by December 2007 and running until 2015. Once we are at full capacity, we expect to sell approximately 38 million doses of flu vaccine each year to our distribution partners.

The flu vaccine manufacturing facility has another significant value to ID Biomedical. One of the principal reasons we acquired the Shire vaccine assets was to have the ability to manufacture our intranasal flu vaccine, FluINsure. Until the final steps of production, both our injectable and intranasal flu products are manufactured in an identical manner. Therefore, the flu production facility can be used for the production of both products. This has obvious implications in terms of cost of goods.

In addition to the flu vaccine facility, we also acquired two more facilities. The first was a pilot scale and commercial scale manufacturing facility in Northborough, Massachusetts, which is ideally suited to the manufacturing of recombinant protein vaccines. Both StreptAvax and PGC Vax (ph) are recombinant protein-based vaccines. PGC Vax, a new mucosal vaccine was part of a portfolio of early stage clinical and preclinical vaccines, which we acquired from Shire.

ID Biomedical also acquired a partially completed research and development facility in Laval, Québec, which we have completed on time and on budget. Since completion, we have consolidated the various research and development groups within both organizations into this state-of-the-art facility.

One of the major accomplishments that could easily overlooked is the near seamless integration of the two companies. This integration began in April 2004 when we announced the transaction. With the full support of Shire Pharmaceuticals Group, we were able to hit the ground running when we closed the transaction in September. The success of the integration process really started with the fact that it was clear to all employees that this acquisition was synergistic, and that there was a great opportunity ahead for all of us. Both companies had very experienced senior management teams, who enthusiastically and diligently pursued a successful integration. It is with great pride that I can report that we were able to attract and retain the vast majority of Shire biologics personnel from all functions, from senior management to production, quality and research and development.

I will now ask our President, Todd Patrick, to update you on some of the events that have occurred since the end of the fiscal year.

Thank you, Tony. I am pleased to report that since the year-end, we have continued to make good progress on our corporate development goals. First as recently announced, we closed the sale and leaseback transactions relating to our Laval and Northborough facilities. The purchaser of the properties was Alexandria Real Estate Equities, a New York stock exchange firm that is the preeminent real estate investment trust focused on biotechnology laboratories and office space in the biotech sector. Total proceeds to ID Biomedical from the transactions were approximately $50 million CAD, slightly exceeding our expectations. As a part of these transactions, we leased back each facility for a minimum of 15 years with ID Biomedical retaining 3 5-year options to release the buildings after the expiration of the initial term. Thus, we have the flexibility to stay in these locations for at least another 30 years.

As previously disclosed in our year-end guidance, we had hoped to finalize one of the two sale leaseback transactions by December 31, and our expected cash at year-end guidance was based upon this assumption. Obviously, satisfying all conditions to closing took a little longer than anticipated. As Richard Bear mentioned, we still ended the year with a strong cash position in excess of $100 million CAD. And with both of these transactions closing in the first quarter of 2005, we project to end the first quarter with approximately 150 million in cash and cash equivalents for more cash than we have at year-end.

Another important corporate development subsequent to the year-end was yesterday's announcement of an agreement with the U.S. Food and Drug Administration regarding a clinical and regulatory plan for licensing our injectable influenza vaccine in the United States. We can now confirm that we are in the midst of a pivotal Phase 3 safety and immunogenicity study testing Fluviral in about 1,000 subjects in the U.S. This data along with that obtained from a clinical trial of Fluviral ongoing in Canada will be used to seek licensure of the product. We expect to file a biologic license application containing all of the immunogenicity and safety data by no later than year-end. The FDA's center for Biologics evaluation in research, the entity that licenses vaccines in the U.S., has confirmed that our application will be treated with priority review.

If all goes well, which will include a full inspection of our manufacturing facilities, we have the potential to be licensed by the first part of next year on time to manufacture products for the 2006 flu season. As part of our understanding with CBER, we have agreed to conduct a post-approval efficacy study as well as a post-approval immunogenicity study in the elderly. We expect the efficacy study to begin during this flu season. We cannot at this time predict however whether the study will cover more than one flu season.

By 2006, we expect to increase our production capacity to 32 million doses, about 20 million of which would be targeted for the U.S. market. As we have previously stated, we are targeting full capacity to be up to 50 million doses by 2007. We need to point out as we have in the past that there are a significant number of unknowns and risks associated with reaching these production numbers, not the least of which is completing the ongoing expansion and validation of our flu vaccine plant in Quebec City and making certain structural improvements to our upstream processing plant in Laval. If our expansion and facility validation objectives are not successfully completed on time or within FDA regulations, then we will not be able to achieve full FDA approval irrespective of the clinical data.

Finally of course, even if we obtain accelerated approval, we may still have marketing risk when we enter the U.S. market. We believe this risk will be greatly mitigated in 2006 by the distribution deals Tony was discussing, provided we can obtain approval by April 1. If approval is post April 1, then that risk will be mitigated for the 2007 season in going forward. But we would then put together a marketing and distribution strategy for 2006 that may include the same distribution partners or we may look to other partners for that single season.

As with all flu vaccine manufacturers, we will of course still need to successfully manufacture the product and get our lots released by CBER within the industry standard window of flu vaccine distribution.

Also this quarter, we took some important steps to further enhance our position as one of the leading companies in the world in terms of influenza pandemic preparedness. On January 19th, the Company announced the beginning of the development of an experimental vaccine often referred to as a "mock vaccine" against a strain of the influenza virus, H5N1. Experts believe this strain could cause a deadly worldwide epidemic of influenza. H5N1 is a strain of influenza virus that humans have so far have shown little or no resistance to. There is a growing consensus among international experts that the development and testing of a mock pandemic vaccine is a critical component of pandemic preparedness because it will allow manufacturers to shorten production times, thereby providing the general public with vaccine more quickly.

Our development efforts are concentrated on creating a vaccine using the genetically modified variant of the H5N1 strain. We have obtained the genetically modified reference strain from the National Institute for Biological Standards and Control in the U.K. NIBSC is one of the few World Health Organization's selected laboratories that conducts experimental work aimed at producing pandemic reference strains for potential vaccine production. The initial objective of the Company's development program is to optimize conditions under which the H5N1 virus grows and eggs and to develop a virus seed bank for future vaccine production. We are pleased to report that this work has now been completed.

The second phase of the program is to produce a mock vaccine in sufficient quantities to conduct clinical trials and then conduct those trials. The Company is currently in discussions with the Canadian government regarding the funding of this aspect of the program.

Finally subsequent to the year-end, we also announced very promising clinical results from two of our pipeline programs, StreptAvax and FluINsure. The FluINsure results were from our large-scale field efficacy study of healthy adults, where we showed that the product to protect people from cultures confirmed influenza. This success occurred despite the fact that FluINsure, like other flu vaccines in that year, was not designed to protect against a strain of influenza that was not covered by the vaccine. That mismatched strain caused the vast majority of infections in North America. Toward the end of 2004, we reformulated FluINsure with our own antigen and began a clinical trial and reimmunization study in Canada. This clinical trial will give us data on the new formulation as well as data from people receiving FluINsure two seasons in a row.

In January of this year, we also announced data from a Phase 2 clinical trial of StreptAvax, our group A strep vaccine, which we're developing for preschool aged children. This trial in healthy adults showed that StreptAvax was safe and well tolerated and stimulated a strong immune response. We believe that with this data, regulators will allow us to move testing of StreptAvax to children. We expect both of these vaccines to be tested in so-called "step down studies" this year, as they make their way toward pediatric clinical trials. While much attention is focused on Fluviral and with good reason, it is important to note that our product pipeline is of considerable interest and potential value. This is not lost on our employees or directors, and we hope not on our shareholders.

Thanks very much, Todd. Joanne, I think we now would like to open up the call to questions.

(OPERATOR INSTRUCTIONS). David Dean, Sprott Securities.

Just a few questions -- I will give you them, I guess, as three. And I will give them individually. And hopefully, you can address them. Could you give us a breakdown of the product revenues? How much came from Fluviral and how much might have come from NeisVac?

Second question is an update on the progress you are making with the FDA regarding the facility update.

And the third question just relates to -- if you can just confirm that immunogenicity will be sufficient for the FDA. I know you have said that. I just want to make sure that you know, come time for a panel presentation that the panel might not take a different stand.

David, this is Richard. I will take your first question. Fluviral revenue for 2004 was 29.5 million and NeisVac revenue was 6.5 million.

David, in terms of our facility, you know that we had an inspection of our facility in November of 2004. That inspection, we believe, went very well. And it confirms that we have a good facility. Prior though to selling product in the U.S., we will have to have a full inspection of our facility. And we need that before we are able to sell product in the U.S. But again, we took the 483 observations that were given from our first inspection and have been working on those since November, so we have a head start on that whole process.

In terms of a panel, I believe that because of our accelerated approval mechanism, there will not be a panel that reviews this. This will be directly be done by CBER.

Yes, the future efficacy study may be reviewed by a panel but remember the product will already have been approved by that time.

Eric Lun, TD Securities.

I have a few questions. For the results for the U.S. study and the Canadian study, when will those be released? Also in 2006, you have indicated that you could have a capacity for the U.S. of 20 million. What is the minimum purchase that the distributors have agreed upon? And I will follow-up with some other questions for Richard afterwards.

What was the first question again?

Just when will the results be reported?

Oh, remember that this is a pivotal study. So these studies will be reported together, and that's by requirement of the FDA because we have to have full agreement from the FDA on all these endpoints, etc. So expect that in the fall.

In the fall, okay. And it is an immunogenicity end point, is that right?

Yes, it is an immunogenicity end point and safety obviously.

And your second question, the distribution partners would be purchasing 100 percent of our output at that number.

Okay, great. For Richard, in terms of financials, some of the expenses were higher than I had expected. Can you comment first for cost of goods why the gross margins declined in Q4 compared to Q3? Also, the R&D expense and SG&A and depreciation, are these the quarterly run rates we should expect going forward?

And finally, for the R&D contracts, you indicated that you drew down less than was expected in this quarter, the Q4. What's 2005 going to look like?

Okay. In terms of gross margin, let's step back in the gross margin, compare it fourth-quarter '04 -- compared to third-quarter '04 -- would be the allocation of revenues. During the third quarter, we showed very little revenues from NeisVac. And during the fourth quarter, we had $6.5 million CAD in NeisVac. And the NeisVac margins are different than those of the Fluviral margins.

In terms of the quarterly run rates, I think what we're seeing in the fourth quarter when you look at SG&A and a portion when you look at the core of R&D, those are consistent with our run -- to be consistent with our run rates. What you will see fluctuating in which we always see in terms of fluctuations in R&D is just the timing and extent of our clinical trials, so it is difficult to tell you to develop a pure run rate.

Okay, in terms of R&D, you're going to be ramping up with your Fluviral program, FluINsure and StreptAvax. Will that actually be higher than a 20 million per quarter that you saw in the fourth quarter?

We won't guide specifically as to the cost of those programs, but what I can tell you is that cash used in operations in '05 will average approximately 7 million per month. And that this amount includes the 2005 Fluviral development in clinical costs required for U.S. licensure along with support of our other programs.

Okay, 7 million per month -- and can you comment on the R&D contracts?

The R&D contracts or the --

R&D contract revenue from the Shire --

The R&D contract revenue that we recorded, 6.8 million will increase -- obviously increase in 2005 because we have been recording a full year of revenue versus 3 months of revenue. So you can look at that in relationship and probably get pretty close.

Philippa Flint, RBC Capital Markets.

Most of my questions have been asked. But just a couple -- given the Fluviral development, will this impact at all on the timing of FluINsure planned clinical trials or a potential launch in the future?

Will the Fluviral clinical trial impact?

Just in terms of taking out resources, etc. So will it affect the timing of when you start FluINsure further in clinical trials?

Yes, I think what we've guided for FluINsure for this year is our real goal is to move it toward the pediatric study as part to step down. And so in essence, you could see that having an impact on our clinical and regulatory infrastructure because there are only so many clinical trials we can do. And obviously this year is focused towards the Phase III Fluviral studies.

Is it a complete clean trade off? Probably not, because we still needed to do some things with FluINsure anyway in terms of the new antigen work and get those clinical trial results in. So it is probably not a clean break, but it's not an unfair way to look at it either.

So if I understand that, then you would not necessarily move forward with a pivotal adult efficacy trial with FluINsure? The goal will now be to focus on the pediatric market, is that true?

Certainly for this year.

And so, do you -- just to be sure I am understanding you -- you still plan to do the pediatric study this year?

Yes.

Okay. And then just a comment based earlier on what you had mentioned in regards to manufacturing expansion. You said it wouldn't be fully complete until 2008, yet you are still guiding to a capacity of 50 million doses by 2007. I assume that is using the Laval facilities, etc. Is that correct?

Philippa, you misunderstood that. I talked about the 2007/2008 flu season. So obviously, we would manufacture in early 2007 for that at full capacity.

Kosmi (ph) Oreonas (ph), JMP Securities.

Yes, I would like to ask a question with regard to Fluviral. This immunogenicity data that you will be collecting for accelerated FDA approval -- have you now see it with the agency for the tighter or the increasing antibodies that you are expected to see? Is it a two-fold tighter or four-fold tighter? Or that these kinds of details have not been discussed with the regulators?

Yes, Kosmi, it's Tony. We have an agreement with the FDA on what those tighters are, but we are not disclosing that. That's again commercially sensitive.

My second question is with regard to the HR funding facility. Is the revenue from this facility going to continue in 2005, or this is completed?

No, the revenue from the funding facility will be amortized over the length of the funding facility, which is 4 years starting on September 9, 2004.

And my last question is with regard to StreptAvax and the timeliness and a potential partnership there. You mentioned that you're going to start a pediatric trial this year. Could you be more specific about the timelines for the next steps there? And what the thought are with regard to a potential partnership in the future?

Yes, we're going to start a step down study toward pediatrics this year. And I think what we would like to do for sure is get the data from that. Well, I shouldn't say for sure. Our current plan is to get the data from that before entering into any partnership.

As you know, Kosmi, it's always a bit of a tough call in terms of when you do a partnership. The longer you go, the more valuable the program in theory. Although, things can change that as well -- different things in the environment. Right now, that is our plan but we have always maintained ongoing discussions with people. And I think we do not plan to take the program all the way through licensure ourselves. So eventually, we will be partnering the program. It's really a trade-off of the risk and the return of that partnership.

And lastly, could you comment on the potential return of Chiron to the genetic flu business? If that will have an impact at all on the launch of Fluviral in 2006 or 2007?

Well, we don't think it will have an impact. First of all, we expect the market to continue to grow. And frankly, if we're not going to be in the market this year, we would just as soon Chiron be in the market this year to supply flu vaccine. We don't want people going multiple years without taking flu vaccines. We think it is healthy, not only for the delivery of healthcare, but healthy for the market -- for Chiron to be the market. When we enter the market the following year, not only do we hope to see a growing market, but obviously we have the distribution strategy in place already. And we think that will insulate us to a certain extent from some of the market dynamics that could occur.

David Miller, Biotech Monthly.

The first question I have is -- can we assume that there is zero chance for any kind of vaccine distribution in the U.S. for the 2005/2006 loose season?

I think David -- this is Tony -- I think you can assume that unless we were to be surprised by something like -- Chiron has not announced yet what their intentions are. But let's say Chiron did not produce a flu vaccine this year. Then everything could change. But I would assume that we won't be producing flu vaccines this year unless there is an emergency situation.

Okay. Are you going to overproduce a little bit? Like last year, you had a million doses that could have gone to the U.S. market if the FDA would have got its act together for a lack of a better term. Are you going to overproduce a little bit this year from over the top of your Canadian contract just in case or likely not?

Just to be clear on last year -- that was because we had got extraordinary yields that basically from using new technology and improved methodologies, we have got an incredible yield. And that's the only reason. It was not a planned overproduction. And we do not plan to overproduce this year. We plan to meet our market requirements.

Okay, I want to talk a little bit about the guaranteed contract you have with your three vaccine manufacturers. With any contracts, there are some outs. And you have listed some of those, and you talked about them today like the need to have FDA approved vaccine by the end of 2007. And then there's also one that talks about new technology. Can you restate the new technology one that you talked about before because I am not really clear about that. As well as provide us with any others that might get in the way of the guaranteed contracts you have with these three parties.

I think really the material one is obtaining FDA approval by December 31, 2007. And obviously, if we do not -- and we have no reason especially with yesterday's announcement to expect that would occur. But obviously, if we did not, we would have to sit down and see how serious the firms were about that date or whether they still wanted to diversify their supply.

The other one frankly I am just trying to think off the top of my head in terms of what's material. I think the only other real material one is certain of new technology provisions. But one of the contracts is different than the other two. I do not think that is going to come into play in the next couple months. And I say that in the next couple months because we will be filing our annual information form, which will summarize I think better than I can off the top of my head those provisions. In addition, these contracts have been filed with both U.S. and Canadian regulatory agencies. So I think you can read through those David. And I would feel more comfortable with you doing that than me trying to summarize them off the top of my head.

Okay, fair enough. Two more questions -- the first one is -- you said that in your conference call comments right at the end or in there, that you need approval by April 1, 2006 to get on base for your partners for the '06/'07 flu season. Isn't the contractual date that you need to have FDA approval by October?

We have to have lots for each year ongoing. We can't deliver product to them obviously in January past the flu season and make them take all the product. So there are per year timing provisions as to when doses and lots have to be released by CBER enough to get into them, so they can meet their obligations during the flu seasons. So I think that's where you are getting the October 31st date. The April 1st date only applies to the first year following FDA approval. So likewise, they need to make some plans as to what alternative supplies they need to arrange for in a year that we don't have FDA approval.

And so what they are basically saying is -- look, don't come to us September 15th with FDA approval and then expect us to take 38 million doses when we have already lined up supplies for that year. So we had to agree on a date as to when the contract would kick in for the following flu season. So that is where the April 1 date comes in. And that date only comes in once under the agreement. So once -- if that is clear, that is what that means.

Okay, good. And then my last question is -- can you give us some idea of what your likely news flow is for your various development programs and for Fluviral over the next 12 months?

David, we've got a number of ongoing clinical trials with Fluviral, the Canadian study and the U.S. study. We also have studies with FluINsure that are ongoing right now and will end around, I guess, the end of March. We are presently finalizing data from our new mucosal vaccine trial, and we expect that the regulators will soon give us permission to take that product into infants. So in the near-term, there's going to be significant clinical data from our programs.

Sariba (ph) Gosien (ph), Delphi (ph) Capital.

I think most of the questions were asked but just two questions. One is on the 2005 guidance. Are you providing any guidance for that?

As I stated earlier, the guidance that we're providing is that the cash used in operations in 2005 will average approximately $70 million per month.

Any other guidance on you know expense of the revenue or support or --

No other guidance.

No other guidance okay. And are you planning to have guidance throughout the year or not at all?

We prefer not to.

And then one other thing -- I think Tony, you were mentioning that unless you're surprised by Chiron, you do not plan to produce any vaccines for the U.S. market for the 2005, 2006 season. I was wondering -- even if there is a surprise by them, when would you need to know that surprise in order to be able to increase capacity for this year. Because you did mention that you're not planning to overproduce. So let's say if in 3 months, there is a surprise by Chiron, would you have time to take advantage of that or not?

We would not. We would not if it was 3 months. I mean it would have to be very soon.

Like within what a month or --

Within a month or so.

I would like to turn the conference back over to Mr. Linden.

Thanks very much Joanne. And thank you very much for participating in our conference call this afternoon. And behalf of the management of ID Biomedical, I would like to wish you all a very good day.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.