Novavax Inc (NVAX) 2004 Q1 法說會逐字稿

Good morning ladies and gentlemen.

I would like to welcome everyone to the Novavax Incorporated first quarter conference call. [OPERATOR INSTRUCTIONS].

I would now like to turn the conference over to Ms. Julie Tu with the Financial Relations Board.

Please go ahead.

Good morning and thank you all for participating in Novavax Incorporated first quarter conference call.

By now, you should all have received the copy of this morning's press release.

If anyone still needs one, you can call our office at 212-445-8300 and ask for Demanso Alfanso and we'll send you one immediately following the call.

With us today from management is Nelson Sims, President and Chief Executive Officer;

Dennis Genge, Vice President and Chief Financial Officer and Ford Lynch, Senior Vice President, Sales and Marketing.

Before we start, the company has asked me to remind you that forward looking statements can obviously differ from actuality and relying on them is subject to risks.

Factors that can cause forward looking statements in this conference call and Web cast, to differ materially from actual results are discussed in the company's Form 10K and other periodic forms with the SEC.

So at this time, I would like to turn the conference call over to Nelson Sims.

Please go ahead Nelson.

Thank you Julie.

Good morning everyone and welcome to Novavax's first quarter 2004 conference call.

As Julie mentioned I have joining me two of our senior executives, our Chief Financial Officer, Dennis Genge, who will report to you as well as Senior Vice President of Sales and Marketing, Ford Lynch, who will also report to you and give you and update regarding our launch plans for ESTRASORB .

Before I turn the call over to Dennis Genge to review our financial performance, I would like to take a few minutes to review where we are today and update you on some of our priorities and commitments we've made to you during the past conference call.

During that call, we said that we would finalize our preparation and validation of our manufacturing facility.

We told you we expected an FDA inspection at anytime.

We made a commitment to bring on our board, our senior management team, manufacturing executives.

We made a commitment that to you that we would hire more sales representatives and expand our sales force above 70 was the full intent of moving to 80 later in the year.

We informed you of our plans to train ourselves organization in preparation for the launch of ESTRASORB, we also told you that we were in the final stages of finalizing our launch plan for ESTRASORB and finally, we've given you guidance of our intent to launch ESTRASORB late in the first quarter and continue that launch process through the second quarter.

As to our first priority manufacturing, as we stated in our last conference call, we filed our CBE or as the FDA calls that are changed being affected from the manufacturing scale point of our plant in February.

In this case, no news is good news and having not received any letters from the FDA, we have moved for producing inventory for product launch.

The second milestone regarding our Philadelphia manufacturing facility was the completion of an FDA inspection, which took place in April, and in fact, they walked into the door shortly following our last conference call, in fact, the day out.

We were pleased to have not received any 483s the FDA officer had a few minor standard operating procedure recommendation, which we addresses on the spot.

We are particularly proud of the hard work of our manufacturing teams and we are moving both team ahead.

Our third commitment was to add management strength to our manufacturing grows in April and we brought on Dr. Rahul Singhvi as our Vice President of Pharmaceutical product development and manufacturing.

As our press release stated Dr. Singhvi has adopted degree course from MIT and MBA and 10 years of extensive experience at Merk.

Rahul has extensive process development as well as manufacturing experience as he started out several plans for Merk.

His expertise will be particularly valuable as we continue to ramp up production in (inaudible) in support of our launch activity for ESTRASORB .

In addition to manufacturing as I mentioned, Rahul will had our pharmaceutical development efforts to fully utilize our micellar Nanoparticle technology platform well beyond hormones.

We also remain on track with our sales force expansion.

We currently at 74 and as we mentioned moving towards 80.

We still anticipate reaching that level of 80 in the near future.

Next on the training at our sales force in nearly complete and we will conclude with our national sales leading to March as to sure of mid May.

Our sales team in conjunction with the King Pharmaceutical sales force of 80 is ready to begin a robust campaign to educate the OBG community about the benefits of ESTRASORB .

Finally we are fortunate to be their by such a seasoned group of sales and marketing executives, which of course include forward launches of our senior officer and Ray Hagen and Howard Miller (ph) working with Ford.

Until their leadership we have finalized our marketing launch plan.

Our upward division of additional details on the progress later in this call but as expected we shift the initial products samples to our distinguished advisory panel late in March.

This began the initial phase of our product launch.

In late April we expanded distribution to include another 150 positions and their patients.

And after the national sales meeting all sales people will be out settling the product.

This put us on track for the commercial launch of that ESTRASORB by the end of June with products sale through the wholesale distribution expected to commence in May and the retail pipeline should be built by late June.

ESTRASORB also made a big squash at this weeks Americans college of Obstetricians and Gynecologists that 52 annual meeting.

Lower that sponsored a clinical symposium in tidal lotions range and other things.

New options for menopause, which was shared by a very distinguished panel led by Dr. James Simon President of the North American Menopause Society.

The panel also included Dr. Robert Brain Assistant Clinical Professor University of California Davis and Dr. Robert Langer Professor of Family and Preventive Medicine at the University of California Santiago.

We had a four hours to listen to this distinguished faculty discuss the options and advantages of new estrogen delivery systems including ESTRASORB .

Together with change we also started a group for extra sales and traffic with the head of our expectations with significant interest in the product.

In addition we also sponsored a note of that group that featured our new line of pre-natal vitamins, which we continue to be well received and worth so to continue to help us gain entry into the doctors offices.

Also during ACOG Micellar senior management was interviewed by multiple radio and TV stations.

As that this morning these interviews about ESTRASORB have gone to an audience of approximately 22.5 million on radio and over 2 million on TV.

To talk more about our financial performance in the quarter I will now turn it over to Dennis Genge.

Dennis.

Thanks Nelson.

I am pleased to report for the first quarter of 2004.

We have reported total revenues of 3.2 million compared to total revenues of 1.2 million for the prior year period.

A $2 million increase.

Of that total on product sales where 2.2 million compared to 900,000 an increase of 1.3 million for a 144%.

The primary reason for the increase was due to the recent introduction of Novanatal and Novastart are new pre-natal vitamin products.

In addition, excuse me, first quarter '03 product sales were unusually low.

The product sales declined from fourth quarter levels was anticipated as we have noticed some extra stocking of ABC and Gynodiol by our distributors in the fourth quarter of 2003.

We also recorded $960,000 in contract research revenue for the first quarter, compared to 204,000 a year ago period.

The $756,000 increase was driven by revenue recognized on two new contracts with a National Institute of Health related to our research on HIV vaccine development.

Overall, operating expenses for the three months ended March 31, increased 1.5 million or 23% to 8.1 million versus 6.6 million from the 2003 period.

Sowing and marketing expenses for the quarter were 2.8 million compared to 2.2 million in the first quarter of 2003.

This $600,000 increase reflects higher costs associated with the launch of ESTRASORB , including advertising, promotions, market research and sales training.

Sales and marketing expenses will continue to increase in the second quarter.

G&A expenses for the first quarter rose 10% to 2 million, compared to 1.8 million in the first quarter of 2003, primarily related to first editions over the last 6 to 9 months.

R&D expenses were 3 million in the first quarter compared to 2.4 million in the prior year period.

This $680,000 increase was primarily due to expenditures and depreciation at our Philadelphia manufacturing facility as we gear up for our product launch.

Interest expense for the first quarter was 362,000 compared to 401,000 first quarter of 2003.

Thus, in total, we reported a net loss of 5.3 million, or 15 cents per share for the quarter, compared to a net loss of 5.8 million or 22 cents per share in the first quarter of 2003.

The decrease in the net loss, year over year was again related to the increase in revenue, partially offset by increased expenses.

In addition, our average shares outstanding for the quarter increased to 34.7 million compared to 27 million in the comparable quarter of 2003 due to the sales of over 9.2 million shares of stock in 2003.

We ended the quarter with $21.9 million of cash compared to 27.6 million at December 31, 2003 and with working capital of 21.8 million, down from 27.2 million at year-end.

We feel this down should be sufficient to take us through this large period of ESTRASORB.

With that, I would turn it back to Nelson.

Thank you, Dennis before I open the call for questions and answers, I would like to ask Ford Lynch to further update you on the latest achievements from the marketing firm of ESTRASORB.

Thanks Nelson.

Having just returned from ACOG, we are very excited about the support from the BOC community, and the new alternative treatments for estrogen therapy and across and particular ESTRASORB.

We continue to believe that our delivery system is unique and importantly, they supply the standard of levels of predictive dial on the blood for the 24 hour period, which is very effective in minimizing rate through half flashes and night sweats and of course, the troublesome side effects from erratic peak and valley (ph) blood levels.

Women will find this delivery technology very appealing, women like lotions and this one is a natural on setting, moisturized emulsion like lotion in a sore base I believe that women will be interested in estrogen in this lotion preparation with Boric recently, has just completed nation wide survey from north world wide.

A top 10 market research, we found that 5% of women are not completely satisfied with their current estrogen therapy and that they use - those women that would seek this treatment, for the symptom, 70% would be very likely to try estrogen.

In addition, 25% of the women that are not taking treatment right now for menopausal symptoms, stated that they would be very interested in a lotion like pharma (ph) and would be very glad to ask physicians about it.

This incidentally is supported by previous findings in the hunter survey, which I think many of you have been aware of, with 58% of former pill users and 84% of the former patch users said they would request estrogen that is available.

Promotion materials have been developed and are now being field-tested in the first phase of our cascade launch and we are very happy to report you that the material has been exceptionally well received.

And we introduced ESTRASORB to the medical community at a cost, we are looking ahead to our national sales meeting in mid May, where we will continue with a way of our training.

Our first 20 sales people have finished the training program, which includes free training margins, binders and 3 CD's on physiology, estrogen therapy and ESTRASORB in the competitive market place.

All of these 6 modules are incidentally are followed by on line testing and we are happy to report everybody doing exceptionally well.

But also, we mentioned, since the launch of to our wide re panel in late March and, we are expanding our program to a 150 doctors with a potential to treat 800 patients and following the sales meeting, this will be expanded to 800 physicians and over 4000 potential patients.

Everybody is enthused, excited and confident and we are targeted the product sales to the national wholesale distribution to be completed in June, allowing for the full promotion nationwide.

Nelson.

Thank you Ford, before we open it up for questions, I just want you to reiterate everyone here that the team here at Novavax is laser focussed on the launch of estrogen, it is also important to remember that estrogen is the first and what we hope to be a performer of products that utilizes our proprietary by selling Nano particle technology, while we have not made any decisions on exactly what compounds we will be moving ahead with next, we will continue to perform testing with outside advisors and we are finding our technical criteria to determine, which one of our long list of opportunity products best fits this delivery technology.

We continue to hold that we will be able to sign at least one agreement last this year, perhaps early next year with big pharma partner for one of their compounds.

We also obviously are focussed on several compounds that would be exclusively Nova Bank.

As we embark on the anticipated launch of estrogen and the commercialization of our proprietary technologies, I am confident that we have a mysterious team in place and plan necessary to create long-term value for our shareholders.

The milestones to measure us by for the next few months would include one, increasing our sales towards the 80 people to match the ken organizations.

Full completion of our training programs and our national sales meeting, which of course, will happen later this month, commercial quantities, of assets who have shipped into distribution, beginning in May, finalizing in June, papers generated from the ACOG clinical symposium and distributed to the OBGYN community nationwide.

Further progress on the identification of additional compounds for pre clinical work for Nanoparticle platform and finally, during the second half of the year, we will also report to you our significant progress with our vaccine programs which of course are lead by Dr. Gale Smith.

I would now like to turn the call back over to operator, for questions and answers.

Thank you sir [OPERATOR INSTRUCTIONS] we have a question from John Stevenson, please state your company name followed by your question.

John Stevenson from Summer Street Research Partners.

Congratulations on the progress you are making.

Thank you John.

Just a couple of questions, just part of the update on the end result product, at what point were you finalize the strategy for that discussion as to what indication you are likely to see.

That is my first question, we have a couple more as well.

OK, I will take that one first.

Actually, is what we were anxiously awaiting this week at ACOG, Procter and Gamble as you know is developing a testosterone trans normal product for female sexual disfunction.

They actually had a report at ACOG, they broke their code on their latest clinical findings and they were obviously a Novavax scientific team to evaluate their progress.

We have actually completed with our testosterone product, brand named ESTRASORB , all of our phase one work, we have submitted it to the FDA, and they have cleared us to move into phase two.

So, the decision that we need to make following the release of the latest information, reported this week is just what indication we need to design our product for.

We do plan to move ESTRASORB forward, I guess the question is whether or not we go for female sexual disfunction which is a much larger and more expensive clinical program or strategy to go for an indication to just increase sub-levels of testosterone and not pack the female sexual disfunction indication to that.

We need to put some numbers to that and we will report our strategy forward on our later call.

I mean will that likely what we see on the Q2 call?

I think that is a possibility, if not Q3 call.

One thing that I also should say is we are ecstatic about opportunities with many compounds, micellar Nanoparticle technology.

We are a company that needs to make choices, we can't develop everything at once.

There are some enormously large market compounds that we believe have a very high probability of technical success for the micellar Nanoparticle technology.

So, in essence, there will be a competition amongst these compounds and we will size them up very soon regarding technical feasibility as well as market potential and so, ESTRASORB if you will, will compete against those other programs.

Hopefully, we can finance as many as possible.

Right and did you in discussing your amounts, you mentioned that you in the next several months, may be quarter or so, you might disclose which products you are moving into development on your own, was that what your-

That is our hope, I am not sure I would get to that by the second call but I think it should look to some guidance certainly by the third call, I am very pleased with the progress that has been made by Dr. Smith and Dr. Singhvi and working with Dr. Wright, we have also worked with outside consultants to help us further define the technical parameters to improve the probability of selecting compounds that will work in this technology, they essentially have 3 technical parameters, they are focussed on.

We have screened all products, currently improved by the FDA in the US against this technical parameter.

It is an impressive long list.

Those products that potentially will work in this micellar Nanoparticle.

It is now a decision, actually, we are going to take some of them into the lab, we can run them through some pre clinical testing and some - pretty quick time frame and then we will select which ones to move towards the clinic.

And just the questions on sales and marketing, do you mind how many reps you had on staff at the end of the last year and then I will crawl back?

I am going to turn that over to Ford but I will say we will give you an approximate number.

Ford and I are in New York today, and we don't have -

That is fine.

It is about 60 at the end of last year, we just had a sales group, we graduated I think 18 new employees, attrition rate, so we are up around 75 now.

OK and then I was just curious, going, -- obviously with expenses associated with a corgen and now obviously expenses with the sampling of the product as you bring it out to some of the leaders, could you just briefly elaborate me on what will kind of income and expenses you will see in Q2 and forward, regarding non-reps expenses, I promotional activity, sampling, medical needs, that sort of thing.

Right, I am going to turn that to Dennis, but I will just give enough for a comment, I think you will see our greatest expenses in this calendar year in Q2 and Q3 simply because of the large ESTRASORB and you will see them again to come down.

I will also remind the audience that our marketing expenses are shared 50-50 with Ken, so Dennis, you want to talk a little more specifically about what happened in Q1 and may be some guidance for Q2.

I will back up a little bit, I think most people know there is a product community with King and Novavax with 6 people had looked at the budget for the promotions and marketing material and has approved and then very pretty much control most of the expenditures related to that and as Nelson said will be a reimburse by King.

So some of the total plan for the launch some of those expenses there coming in the first quarter.

We think the majority of those will come in the second quarter as you know we are not doing direct to consumer but we are doing quite a bit of promotion to key doctors so that's a major expenditures, the symposium of such we had yesterday, there are three or four different training sessions with our sales rep and there is also key meetings, I'll call them again with decision makers or high prescribing doctors over the next few months.

So the majority of our expenses will be in the second quarter.

OK, great.

Thanks a lot.

Thank you John.

Yeah.

Thank you for your question sir.

Our next question comes from Ko Recor (ph).

Please state your company name followed by your question.

It's Ko Recor from CE Unterberg Terbin.

Nelson, can you give a little bit of analysis, can you bit help understand the importance of the already existing approved platform and what that means going forward in potential say in terms of prime and money for new compounds, if you could.

Make sure I understand the question, so there might Nanoparticle platform, what that means to us in terms of time and money going forward, that's -

That was basically the ability to shorten the expense in time cycle for new approved products.

OK, great.

I think couple of things we can comment on.

One, anytime you complete your first cycle with product number 1, you obviously learned the whole lot in their process.

It took us 9 years with ESTRASORB and as we go back and capture the left (inaudible) in their prospects, there were I can assure you too many dimensions in this conference call and we learn from every single one of them.

I think our best estimate and it would depend on the specific compound that we put in the development process.

It is some or more difficult to work with others.

But if you alarm these some of (inaudible) I'll discuss we'll call up to average compound.

We think we could take through the group press report, pre clinical work and then move it into the clinic in a time frame somewhere in the 4 to 5 years time frame, which of course, would compare to a new chemical entity in the 10 to 15 years time frame.

In the case of my form of life, have even seen compound still beyond 20 years to fully develop.

So, as we look at the clinical opportunity of adding significant patient value and economic value by putting existing compounds into this platforms, we think it's an enormous opportunity for discuss in our shareholders.

We have found compounds that just for example, real compounds that cause significant GI to stress the patients, and so the question might be with that example, how much bigger would the market be to that compound if you could administer it with our lotion like emulsion so that you by pass the GI disturbance and fact even achieve more sustainable steady state blood levels.

We found several of those compounds.

We are truly exited about the opportunity moving three maybe even four within the next 12 to 18 months in to the development process.

So there are shareholders down the line, we will see a series of product launches in the four to five year time.

Nelson, I am sorry could you hear me.

Yes.

Would you repeat the last statement again it just a little bit noisy here on the last statement about he 3 or 4 compounds?

As we size up the opportunities of what compounds we think are the best candidates to meet the technical criteria to have a high probability to work in the micellar nano-particle platform, we envision building development teams creating developments teams here at Novovax, so that we have three perhaps even four different drug products moving through the development process at once.

That's great.

And I can't tell you how pleased I am again with new scientific leadership that's come on board here at Novovax with Dr Smith and Dr Singhvi working with the original creator Dr Wright for this platform and I can tell you it's a synergistic effect that I am observing and a lot of progress is being made, I think for competitive reasons we are not ready to release the compound names we have but we obviously will hopefully by the end of the third quarter maybe fourth quarter.

So just on the personnel side to if I may ask another question, the depth of management that you have been talking about here, how far does that expand, how deep does it go in terms of the number of people in the positions that they occupy?

That's a kind of an awkward question what I am trying to get at is you know aside from yourself which you are very visible you know where do we go in terms of personnel from there?

OK, I mean I have now been at Novovax, I guess I have been 7 or 8 years and obviously as you move into a new organization, my first strategy is to size up your leadership team as the audience is well aware I have made several changes, we had several gaps and we just didn't have the capability on board for our senior team.

So one of my first people to bring on board was Ford Lynch, our Senior VP of Sales and Marketing.

Ford has joining him two exceptional talents with Ray Hage and Howard Miller in Vice President spots for Marketing and Sales.

We also brought on Vice President Ray Jard (ph) to help me find these talents with Al Lichtenstein.

I felt like I needed new leadership in the vaccine area so we brought on Dr Gail Smith who literally is a world-class vaccine scientist but what I have really become pleased with is just his scientific acumen and his scientific leader ship capability.

So he has helped us on the drug delivery side extensively as well I felt like we had very, very good people in the manufacturing area and we just didn't have the depth we needed and we needed some significant leadership that had been experienced in either biotech or big pharma and we were very fortunate to find Rahul Singhvi and he is an exceptional talent and one that I am sure will bring significant value to Novovax shareholders both whom.

Over to you if I missed.

I think you got --I think you got the major ones you also have that quite a (inaudible) people we know from extensive network in through the years in the pharmaceutical business and then on the short term.

They have helped us with a lot of that the launch type of things.

I might mention to we are, we have a vacant space to our General Counsel.

I've held off on that instead of we can just focus on this ESTRASORB launch at the moment and we have quite good support from several outside Counsel firms.

So we are in good shape there.

Now you know, further to your question is what's the depth being built below those exceptional senior leaders.

And it's what we need to do there and I am sure that we prioritize those positions.

You know there is a lot of capability gap in a small company like Novavax as we can tell some of those in with outside resources.

We have chosen obviously to focus because of ESTRASORB on making certain that we are -- have the sufficient counted in the marketing arena and the sales arena as we launched ESTRASORB and now what your are going to see is the built depth into the manufacturing areas and also our depth into the product development areas and their level.

Gale has made a few changes over in the vaccine area that has a fairly sizable group of the rent what is already sold.

Another thing I should mention is --is we are hosting at the scenes in the new offices in Columbia, Maryland.

And as we sized up for this launch of ESTRASORB and think that (inaudible) we are strengthening our financial components as well and so we are entertaining opportunities to relocate out of that facility and we will expand as our cast that wider net to look at several different locations even some in the state of Maryland and some even outside the state of Maryland.

And to possibly make it a little easier and to make to put us in a position where pharmaceutical talent is more readily available.

Was that the North East area, a territory kind of area?

Yeah, definitely the North East, No-both moves to the west coast.

Yeah, having good of hyper tech I have lived out there and its nice.

But that is the both of the move, we are going to stay focused and we will call up to Washington DC up to New Jersey quarter or somewhere in there.

Great.

And my last question is that is the expense on the expense side here have been, are these numbers I mean market seems to be have taken a like of little negative kind of reaction for some reasons.

But which I don't understand.

But are these expenses, which be that anywhere near outside of what we have been thinking.

Once you know probably a less month or so.

No, are you talking about our operating expenses?

Yeah, exactly.

Well it is in plan in fact you think you can launch a product for those kind of number is pretty amazing and Ford mentioned you know the talent we have brought in and their connectivity ot all types of outside resources.

We have saved enormous amounts of money by their contacts in terms of how we utilized our resources.

We have gotten significant (inaudible).

I will give you an example ACOG came from a former life, where he was a senior officer in a women's health company and had a significant relationship with the people that run this big ACOG each year and we were able to capture that breathless clinical symposia flat because of his connectivity with the leaders of ACOG and you know, that didn't cost us anything, but without that kind of count on board, with that sort of resource connectivity, we would never have been able to do that.

So, I am really pleased with the senior team and I am pleased with their ability to build first class organization underneath them.

Great, Nelson, thank you very much for all the answers.

I appreciate it.

Thank you sir for your question.

The next question comes from Terry Niker (ph).

Please state your company name followed by your questions.

Wachovia.

Mr. Sims, I have been listening to these calls for about 30 years and I have rarely heard a CEO as enthusiastic as you are.

There is a lot of excitement in your voice, thank you.

I wanted to ask about - and I haven't seen those, is your pricing going to be comparable with ESTRASORB to patent?

Good question Terry.

That, we have already announced that price, it actually is public and I am sure our competitors have seen it.

So, I will mention it.

We have priced the product to 39.50 and if you look at the price range of ESTRASORB replacement therapy, you got very inexpensive therapy which would be your generic oral medications and then you got - we looked more at the pricing range trans thermal or patch therapies and we priced it on the premium end of that range, we think we have significant advantages with ESTRASORB and so, we priced it at 39.50, most of the patches are around 35 to $37 range.

So, I should say for a month of therapy.

That's a month of therapy.

In all cases, is the patient - herself paying for this or is there ever situation where there is another payer?

Ford will answer that.

This will be covered in the same peers as the we suspect, is being covered in the same peers as the vial patches and the premier patches, the second and the third peer in all the HMO's.

The first here almost exclusively is the result of the generics, which is as cheap as $4, 500, so we anticipate this will be probably embraced by the managed care community.

Good and then, as far as margins, have you talked in terms of what your margins are?

We have not given guidance on margin, the only thing that I would comment on is that as with any small company with their first product coming to market, we had to build the manufacturing plant, so we have a lot to absorb in the initial launch phase, so you will see margins rapidly improve as our volumes of sales improve.

It is very volume sensitive.

I should also say that we are launching in the packets, so ESTRASORB will come in these little foil packets, and women would use daily dose two packets at the same time, in the morning, once a day dose and we are currently initiated a bottle program, so we will come to market, I would like to say late in the year, but probably is more safely when you got the FDA approval involved I would say late in the year or early next year, a bottle offering, so that we would sell one bottle which would be a month of therapy.

And there are significant margins, advances obviously in filling bottles, instead of those individual daily dose packages.

Right, the US market I understand is about a 1.5 billion for estrogen, I have not seen any numbers about the rest of the world, how large is the whole market worldwide?

Because the US is the only market, we are approved in, again we are laser focussed on that, let me just talk off at the top of my head, so I cant say that in the past couple of months, I've looked at the specific estrogen market worldwide, we need to do that, King does have the right outside of Puerto Rico, and the United States, we obviously received a royalty for the sales but they have those rights, but generally, a good general rule is the US represents about a third to half of the worldwide sales, depending on the therapeutic class, the product.

Pricing in Europe, the Europe will have the volumes that the US will have but pricing is generally not as good as in Europe as it is in the US.

You can take at the US at somewhere around - between 40 to 50% of the global market opportunities.

And then the King has all the rest of the world with the exception of the US and Puerto Rico, did you say?

Yes.

Have you publicly disclosed what your relationship is between you and King, relative to that?

Actually, the contracts are public documents.

And how much will you make of those revenues?

It's a royalty and it depends on the country.

OK.

And if I had the contract in front of me, I would decide it to you, because it is public but I don't, so I don't want to make the mistake.

Super.

You focused obviously on your laser focused on ESTRASORB, but the Nanoparticle technology is one of the more exciting technologies I have seen in a long time, if you would have to rank the VLP technology compared to it, how large the potential does VLP have?

VLP and for the rest of the audience, if that did fly over your head, VLP stands for Virus Like Particles and that is over in our vaccine group, there are other companies that have virus like particles as well, Novavax has some unique applications for virus like particles, which I refuse to embarrass myself, because I am going to have Dr. Gale Smith on one of the conference calls later in the year, I just felt like the audience was primarily interested in ESTRASORB and in the first two conference call, but I do owe you the opportunity to listen to Gale, we have significant opportunities at vaccine, I have to be very honest and tell you that it is a risky business than I saw in Nanoparticle business, but you know the risk here is obviously the higher to return potential as well.

And I need Gale to come back for the conference call to update you on where we are with this $20 plus million contract that was awarded to us last year to develop an HIV vaccine, it was awarded to us by the NIH, we were ecstatic that they selected Novavax and our proprietary technology for the development of an AIDS vaccine, to use layman award as I can, Gale tells me that what we are learning is very, very applicable to other vaccines.

So, we can take what we learn in this HIV program, apply it to influence, etc. we are very excited about it.

I can also tell you that we are well ahead of schedule on that 5-year program from the NIH and I will have given some - I probably on the third quarter conference call, I'm sure you want to hear all about it, sure (inaudible) the conference call, because it will be post March.

Are you prepared with the HIV vaccine, or your doing any animal trials?

No, that's closed.

OK, thank you very, very much.

Thank you again.

Thank you sir for your question.

Our next question comes from Martin Gruber (ph).

Please state your company name followed by the questions.

Grenn Allen Financial.

Nelson, I'm a long time investor in Novavax and I love everything that I see that you have been doing with the company.

However today, the stock is weak and I can only and it should be strong.

It shouldn't been strong or for last month or two.

What is it Martin?

The thing that bothers me or as that I see it today is the best issue of King of a number of their women's health products.

Can you elaborate on that a little and reconfirm Kings commitment to Novavax and ESTRASORB ?

I'll come at it, from a couple of different angles.

I think it is very public what King has done today regarding their women's health program.

I can tell you that King as a partner at the working level and I'll put that at the Ford Lynch and King level had been very good.

We are in contact with them multiple times each day.

Every decision of any consequence is a 50-50 decision and certainly all of the program level positions are may jointly because we share the expenses 50-50.

So far, we have been very pleased with both their capability and co-operation as a partner.

I shouldn't speak specifically about King because I'm as far from an insider the King as you could imagine but it is public that they have talked to other people about their women's health franchise.

At the end because our contracts are public, they really don't have the right to sell ESTRASORB without our approval and so it gets to it bit evolves to those discussions will take them one day at a time but I can tell you right now, we are working hard together and I'm confident that we are on track to successfully launch this product.

Thank you.

Thank you sir, for your question.

The next question comes from Walter (inaudible), please state your company name followed by your questions.

WJ Pass Europia.

Mr. Sims I too among a fixed quarter of Novavax three years, I'm asking you a question.

Can your manual part of Corel Technology expand the life as an interesting drug pattern?

The short answer is yes.

In fact, I think that's an important part of our strategy.

I mentioned in my upfront comment, we have worked diligently to further define the technical criteria to increase the probability for success on the compounds we select.

So once we have identified the compound that put in the technology then we have to ask ourselves the question, why would you want ot do that?

Does it add to clinical advantage to the patient and I think I gave the example of the GI distress for example, if you could eliminate that that would be an advantage to the patient.

We also would look to create a advantage to a big pharma partner by further increasing their patent protection and we have isolated several compounds that are multi-billion dollar sales compounds and the clock is ticking within the well - within the seven to five year time frame from coming of patent for those compounds.

So, lets use an example of we do deal with a big pharma, to put their molecule in our delivery system, we bring it to market a couple of years prior to their patent expiration and during that period, both their sales force and possibly ours would share shift that molecule from whatever other dosage format is to our Micellar Nanoparticles dosage form.

I think its unlikely that you would share shift for the whole molecule, but I will use an example, that you got a product, it is $3 billion and you can share shift over 25% to 30% of the product to this platform, it would give our partner a patent extension out to 2015 and if it were a $3 billion product, we will have a $1 billion in sales.

So, I think there is some great opportunity with this technology.

I would reiterate to the audience that the platform not just ESTRASORB is the reason that I joined Novovax.

I think ESTRASORB is going to be very successful.

It won't be an overnight phenomena, those really happen in this industry unless you bring a compound in the market that meets an unmet clinical need and so this product will be successful but not over night.

But the real value of this company is in the pipeline and in that Micellar Nanoparticles technology.

That sounds fantastic.

How many drug companies are you currently working with to license your Nanoparticle technology with their existing products?

Very good question and one that I am going to dodge for competitive reasons.

I am dodge that question, I can tell you that we have held back and it's difficult for us to do that because we are so excited and anxious about it.

But having come from a big pharma and having spent many years in their business development and alliance areas, you really need to be buttoned up when you go in there and that's what Rahul and Gail and Dr. Wright right now are focussed on, in making sure we are buttoned up with the technology story and we are even looking specifically at their compound and half and what we think they would want to know before they would sign a deal.

We are getting to close to be in there and in the third quarter, we will be approaching several of them.

I don't want to misguide you though, we had some very, very preliminary discussions with some companies but nothing serious and it's by our design.

When we go in, we want to go in ready.

How long would it take from start to finish to get another drug company license with you technology?

Well, we are ready to move at turbo speed, but it's the right limiting factor is 99.9% of the time to the big pharma company.

They are big machines.

They move at their own pace and I think one advantage we have, is we have a multiple talents on board with Novavax, now that have come from multiple companies that know how they work and we have got connections in those companies.

So we will go in at the bottom.

And we will go in towards the top of those companies and we are developing a strategy that reduces the barriers to entry for them, so we make it easy for them to work with.

This is - if you look at the cost of developing an approved molecule in Micellar Nanoparticle technology and the only way I can describe is its miniscule compared to the cost of developing a new chemical entity.

So I don't look for big barriers to sign a deal but they are big companies.

They have got a lot on their plate and sometimes, they don't move real fast.

And that's why, I think I would be misguiding you if I give you specific dates of whether we might sign deal, if it is within our control, I will do it but its not.

Since FDA has already approved your technology using the Nanoparticle technology with another drug, the drug company wouldn't have to go through that same long process.

Would they?

I don't think so.

And I think our learning would really from ESTRASORB and the early days of ANDROSORB were to accelerate the process.

And also ecstatic, when I listen to our three league scientists, now, you know talk about the learning's and how they would approach it differently to accelerate that process.

So pretty confident, we have got that horsepower to get this done.

Thank you very much.

Good luck.

Thanks.

Thank you Sir for your question.

The next question comes from Robert Filinca (ph), please tell your company name followed by your question.

Hello Nelson.

Yes, my question revolves around the time line for these new products, you gave us compound time line.

But if you went former and they chose to use this.

Give us the time line from when you introduce them to this to when you think this might became viable and what the major steps along the way would be?

First, hello Robert.

How are you?

Fine.

Let me --let me start from well, we agree to move a molecule forward with big pharma, because I think that time frame will have the most flexibility depending on how fast that particular company would work to move on doing the deal.

Once we have the deal signed, than we move into the treatment - we hopefully would have proof of principle completed and normally that you know conservatively, I would say 6 months time frame.

Preclinical work on the year-year and a half, I ought to have my R&D guys answering this question by the way.

But I will say, a year, a year and a half and than you go into the clinic and it could take two years, I would say you know very conservatively, may be even after three, but I think you are in that probably 4 to 5 year total time frame from the day you start to you know, the day it get approved.

That-that somewhat you know and we would of course, we would come to you and tell you when we hit the major milestones, past three clinical in the phase 1, in the phase 2, in the phase 3 and submission.

It does appear that Mr. Roberts line has disconnected.

OK.

And we do have no further questions at this time.

Are there any closing comments or remarks you would like to make at this time?

Well, I just want to thank everyone for their participation in the call and their interest in Novavax.

We certainly appreciate our shareholders.

Our mission is to create great shareholder value and at the same time, improve the life of patients.

I can tell you it was a very, very busy week this week with our annual meeting this week, our Board meeting in Philadelphia as well as the annual ACOG meeting.

We couldn't be happier with the result of the week, but we remain very optimistic and we look forward to report to you at the end of the second quarter about this specific of our launch at ESTRASORB.

Thank you Sir.

Thank you.