Novavax Inc (NVAX) 2005 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the Novavax third-quarter 2005 financial results conference call.

My name is Candace and I will be your coordinator for today.

At this time, all participants are in listen-only mode.

We will be facilitating a question and answer session towards the end of today's conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today's conference, Mr. Gary Evans, Chairman.

Please proceed, sir.

Thank you, operator, and thank all of you for dialing in for Novavax's third quarter 2005 financial results conference call.

We had a press release this morning that came out before the market opened indicating our financial results for the third quarter ended September 30.

Joining me on the call today here in New York is Rahul Singhvi, our President and CEO.

Also in our Malvern, Pennsylvania offices, which is where our headquarters are, is Ray Hage, who is our company's Chief Operating Officer and Dennis Genge, our Treasurer and Chief Financial Officer.

What I thought I would do this morning is maybe give a brief agenda review, talk about some of the most recent significant events and then we will turn it over to our CFO to talk about our financial results specifically.

I would like to also remind everyone that we're under Regulation FD Safe Harbor rules.

I'm going to read a portion of our Safe Harbor language that can be accessed on our web site and in our press release and this presentation can be accessed as well.

Statements made in this press release as well as this presentation today state that Novavax or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements.

Forward-looking statements include but are not limited to statements regarding usage of cash, product sales, future product development and related clinical trials and future research and development, including FDA approval.

Novavax's actual results could differ materially from those expressed in such forward-looking statements.

On the agenda today, we are going to talk about some significant events.

We had a very active third quarter and actually post-third quarter, we have had some significant items.

Then we will have the financial review.

Rahul's going to give a vaccine overview, our priorities ahead, and then we will take your questions and try to answer them.

The quarter as I mentioned was a very exciting one for the Company.

We just last week completed an $18 million equity capital raise at $4.30 per share.

That allowed the Company with the raise that we did in July to have over 22 million of new capital raised thus far in 2005.

I (ph) put the Company in a much better financial position to meet our needs for this year and well into 2006.

We also completed several weeks ago and had an announcement and a conference call about our new license agreement on Estrasorb.

This is our primary product that we've been working on for over 10 years.

We completed that agreement with a firm called Esprit Pharmaceutical and that was for only North America distribution.

We received $2 million at closing when we executed this agreement with Esprit.

We will receive another 8 million by the end of December of '05, so next month, and then we will receive 2.5 million in October of 2006.

So total upfront cash of 12.5 million that is mandatory.

There is no earnout provisions in that cash to be received.

We also have in conjunction with this license agreement a double-digit royalty on all Estrasorb sales here in North America.

We have significant future milestone payments that we are very excited about the levels that these exist and when they may come in.

And then very important for us, we've maintained the manufacturing of this product.

We also maintained our distribution rights in the international markets outside of North America.

Then with our stock movement here over the last month, we were successful in causing some of our convertible notes to convert into equity, which reduced our total outstanding debt from 35 million to 29 million.

This obviously reduces annual interest expense of close to 300,000 a year.

And for those of you that don't recall, our bond debt that exists out there today has no put feature until July of 2007.

So with the cash that we received and the way the stock has been reacting, we feel pretty good about hopefully getting all of this debt converted sometime over the next six months.

We then sold some noncore assets and these were products in inventory that we no longer deemed to be vital to Novavax's future.

We received $2.5 million for this noncore sale of assets and we also will receive future royalties if sales of these products exceed certain predetermined levels.

The management team here at Novavax has worked hard on continuing to reduce our company's monthly burn rate and that continued in the third quarter and we're going to show you some specific graphs that relate to that success.

I like to call this the new Novavax.

We're definitely a company that has been in transformation in the last six months.

We have successfully -- our transition of the Company has been a strategy from specialty pharmaceutical company to one that is a product development focus.

We were able to do that by eliminating our sales force, which at one time, totaled over 100 personnel and you can imagine the associated burn that was related to that many people and automobiles and insurance and what have you.

So that has been accomplished over the last 90 days and you saw the results of that in these financial numbers that we reported today.

We have also strengthened our product development and business development functions.

That has been through a combination of actually adding new scientists on board which Rahul will probably mention.

And then we're focusing, we have a pipeline now of 10 different products that use our technology, which is the same as Estrasorb.

And so we believe that we can create collaborations with other pharmaceutical companies, will allow us to bring some of these other products to market.

We have also accelerated our vaccine technology's potential.

We brought that to the forefront of our company with a major focus for the Company today and the Board is very much dedicated to making sure that we can apply all our resources necessary to make this something that is very successful for Novavax.

We have a broad application of recombinant virus-like particle strategy for our vaccines.

We are flexible and scalable in our product technology and we have proprietary adjunct technology.

We have pandemic influenza vaccine, which is our first target product, and we believe that once we continue to focus our company's efforts on this vaccine area that we can have one of the best products in the United States or maybe worldwide in this region.

I know Rahul is going to spend a lot of time on the call this afternoon focusing on the vaccine area.

So with that, I would like to turn the call over to Dennis Genge, our Chief Financial Officer, who is going to talk about the Company's third quarter financial review and talk about our financial drivers.

Dennis?

Thanks, Gary, good morning everyone.

Today I'm going to take a quick look at Q3 results, and then I want to spend some time highlighting the pro forma balance sheet effects of our events subsequent to the end of the quarter.

For expanded third quarter details, please refer to this morning's press release or our 10-Q, which will be filed later today.

For those following along on the slides, on slide 7 are some of the financial drivers related to just the third quarter.

Back in early July, we completed an equity financing which netted us $3.6 million.

Then in August, we eliminated the remainder of our sales force and in September, sold our ABC and prenatal vitamin lines for 2.5 million.

Both of those latter events were in accordance with the change in our business model, which Gary just discussed.

Our third quarter net product revenues were 1.3 million which was below the second quarter due to the sales of some of our product lines.

However, revenues were 2 million greater than 2004 primarily due to a 1.3 million product return reserve we took last year.

Our expenses continued to decrease primarily due to the reduction in sales personnel and marketing expenses with total operating expenses being 3.4 million lower than the second quarter.

Slide 8 is a snapshot of Q3 '05 compared to '04.

As I mentioned, total revenues were up 1.9 million, while operating expenses decreased 8.6 million from 2004.

Despite our revenues being up and our expenses being down, our operating loss was 2.7 million in both years, but only due to the one-time gain of 11.2 million which was recorded last year for the redemption of convertible notes.

At September 30, cash was 6.9 million and stockholder's equity was 19.9 million.

So as you will see in a minute, those balances have subsequently changed quite a bit.

Slide 9 and 10 are the graphic presentations I have been showing for the last three quarters which continue to illustrate our quarterly reductions in operating expense and cash usage over the past year.

Slide 9 shows that we have dropped our operating expenses from approximately 13 million a quarter a year ago to under 4 million in this quarter, a 70% reduction.

Slide 10 highlights a reduction in our monthly use of cash from operations to below 1 million per month, even without including the 2.5 million from the sale of the product lines in September.

On slides 11 and 12, I would like to point out the positive pro forma effects or subsequent events on our balance sheet.

At the risk of being redundant, as previously mentioned by Gary, since the end of Q3, we have licensed Estrasorb with 2 million in the bank now and another 8 million due by the end of the year; converted 6 million of notes through the issuance of approximately 1.1 million shares and completed an equity financing netting approximately 17 million and issuing almost 4.2 million shares.

Slide 12 shows the pro forma balance sheet effect of these transactions without including any further estimates for fourth-quarter operations.

So on a pro forma basis, cash is up to 34 million with working capital at 33 million.

Our convertible notes are down to 29 million with stockholder's equity increasing to over 50 million (technical difficulty) final shares outstanding at approximately 49 million.

In summary, as you can see, we have drastically reduced operating expenses over the past year, significantly strengthened our balance sheet in just the past few months and we now have sufficient cash to effectively and actively pursue our development program.

With that, I will turn it over to Dr. Singhvi.

Thanks, Dennis.

I'm going to talk a little bit about what we have going on and why we are so excited about the future prospects of Novavax and why we are so excited about just working here.

A lot of us are motivated by doing things that are important for all mankind, and one of these opportunities is right here for us in working on this pandemic flu program.

As you all know, this is a major problem, public health problem in the world, and we believe that at Novavax, we have the elements to address this problem.

I have been saying this in several of the investor conferences over the past several weeks, but I'm going to reiterate that again here today, that there are basically three elements that are required to address this public health problem of pandemic avian flu.

One is that because the pandemic or the avian flu virus is mutating so quickly and the one that is ultimately going to transmit from man-to-man is going to be different from what it is today.

The stockpile idea of addressing this problem is not going to work.

So the strategy has to be one where you can quickly produce a vaccine that can be customized to the new strain.

So that is one thing that is required.

The second thing is that, because stockpiling is not an approach, we have to have the surge capacity to quickly produce a large quantity of this vaccine.

And lastly, you have to have a dose-bearing strategy where you can spread the production to a large number of doses by making the vaccine very potent.

So you need these three elements to have a complete solution to this problem.

We believe that at Novavax, we have a chance to be best in class because we have all of those three elements incorporated within the technologies of the Company.

The first is, how do we match the emerging strain, how do we create a vaccine.

And because we have a technology called the recombinant virus-like particle technology, we are able to match the emerging strains exactly by creating a vaccine using the genes of the strain that's in the field.

We don't have to worry about the virus and growing the virus, and that virus can then mutate during production, since we don't work with the virus, we work with the genes.

So that is the first element.

The second is, since we have managed to work with cells rather than eggs, and because we have a production technology that can use disposable however scalable equipment, we can by definition create quick-surge capacity.

We do not require customized stainless-steel piped facilities.

We can use generic rather low-cost facilities to put these production systems in place.

So we believe that we will by adopting that kind of production technology, we can have the surge capacity in place.

And lastly, because we have a particulate vaccine, which happens to be more immunogenic than a subunit vaccine which is currently being developed by other companies, we believe that we have the dose-bearing element as well in our vaccine strategy.

And moreover, we have certain proprietary adjuvants that can, when combined with the antigens, create a more potent vaccine.

We can even further have a more dose-bearing strategy.

So all three elements that are required to address this problem are within the reach of this Company and we believe that we will be able to convince the governments as well as corporate partners to work with us to really solve this major public health problem.

I have another slide here which basically shows the competing technologies that are out there and why we believe that our technology is best in class.

But I'm not going to spend too much time on that, except for saying that one should understand that there's one caveat, that we still have not had human clinical validation of our technology.

So even though in animals we -- the animal data looks like we have the best strategy in place, we still have to go through the human clinical trials to really convince the whole world that we have the right vaccine.

And that will be the next step for us.

We hope that over the next year, in the first half of next year, we can complete all the preclinical toxicology studies and we can get the process developed, the analytical methods developed and the formulation developed for our vaccine.

And in the second half before the next flu season, have the clinical validation completed so that should a pandemic hit, which in the past has always hit during the regular flu season, if you're ready, with clinical validation as well as production scale-up to go forward should the government need our help.

So basically, I'm going to stop at this point on the vaccines and just follow up with a couple of slides on priorities that we have going forward.

In the last quarterly call, I showed you this slide, which is slide number 17, which showed what were priorities for the third quarter.

They were to reduce expenses by -- it was in sales and marketing and manufacturing costs, which we've done.

We've said that we're going to increase revenue.

We have completed the Estrasorb deal, which is going to bring revenue to the Company.

And we plan to continue to do more in consummating other nanoparticle co-development deals and turning our manufacturing facility into a revenue source.

We have also increased cash as we promised in the last quarterly call by monetizing our products, by completing our Estrasorb deal, by improving our debt situation and by raising new equity.

In terms of moving forward from now on, as you heard, my single mind focus is to drive the vaccine program for the avian flu and to complete other partnerships for -- my fellow (ph) nanoparticle technology so that we can continue to bring cash in the Company.

And we want to continue to focus our organization on technologies and enhancing capabilities by increasing our intellectual property (indiscernible) portfolio.

We will continue to streamline our operations, to reduce the non value-added burn and we will do everything we can to continue to improve our balance sheet.

I will end with this and we will be happy to take any question and answers.

Thank you.

Operator, we're ready to take any questions that you may have.

(Operator Instructions).

Ken Trbovich.

Obviously, you guys have done a tremendous amount to improve the balance sheet situation.

I was wondering if Dennis could provide some sort of guidance as to whether or not the full benefit of the cost reductions was seen in the third quarter, or whether we should continue to expect some additional reductions in sort of the overall operating cost of the firm at this point.

I think we have actually cut the expenses about as much as we can right now.

Obviously, in the sales and marketing area, we've had other reductions in headcount than we have had in other areas.

But right now as Rahul and Gary have mentioned, we plan on spending more in the R&D area.

So whereas certain categories of expense, particularly the G&A, could probably go down some more, overall, I would more expect an increase as we spend more in the R&D area.

(multiple speakers) talk and maybe comment on that.

I think that what Dennis is saying is correct.

We've continued to try to home in on the expenses that don't make the Company any money.

We are willing to spend money on expenses that do, and that means taking money out of G&A and putting it into R&D.

And so that's really part of the transformation that we have been talking about that's going on is beefing up the science side, letting these technicians come up with the answers, and rather than letting it go out in G&A.

Okay.

So I guess as an example on selling and marketing in the third quarter, it was 900,000 and obviously you still had some of your salesforce expense in there.

Even though that number itself might go down, the total expenses aren't really expected to go much lower because you will reinvest that in R&D?

That is correct.

We are fortunately in a position now that we can afford comfortably to spend a little money on R&D more so than we have in the past.

And obviously with the vaccine initiative the Company has, that is where we wanted to spend some focus.

And then just a couple of quick questions on the vaccine side.

I know obviously you guys had some data earlier this year on a different avian strain or I guess on a different flu strain, and it was avian, I guess one of the Hong Kong viruses.

I was curious as to whether or not we should expect data from an animal study on H5N1 in '06, or what the timeline for that would look like.

And then how long thereafter would it take before we see you move that into human trials?

Our plan right now is to move to the H5N1 strain.

And all of the data that you'll see from now on is going to be on H5N1.

We're working with the Vietnam strain, which is the one that is currently being distributed to all manufacturers.

So all of the animal as well as human studies would be done with that.

But are you in a position now where the animal studies are already underway and you have to wait to do human studies?

Or are you able to essentially rapidly do an animal study and then quickly move into the human side?

I guess we're just trying to look for (indiscernible) timeline?

Sure.

We're going to do some more toxicology studies of the H5N1 in the first half of next year, along with some toxicology on a Novazome adjuvant, and then bring a combination program either plain VLTs or plain VLTs, plus Novazome programs, into humans in the second half of the year.

And we expect to have reasonably complete results before the next flu season.

So essentially having some form of human data before the sort of end of the October to March -- so this would be October '06 to March '07 kind of timeframe?

We hope to have data around October of '06, because the flu season essentially starts around that time.

Sure.

And you're not required -- obviously, you're just looking at antibody responses, so you can do the studies off-season?

There's no reason to have to do them in the season obviously?

That's correct.

Okay.

And then just one final question and I will go back into queue.

In terms of manufacturing scale-up, I know one of the things you've talked about is the idea that you are not going to have to have bricks and mortar and a lot of stainless steel.

When do you expect to move into feasibility on that side?

Is that part of the clinical plan or, is that something we should look at separately?

No, that can be done in parallel to the clinical program.

We expect that, once we have a reasonable process in place and we produce DNP materials for the clinical program, in parallel, we can do the scale of work.

Terrific.

One other thing, Ken, getting to the expenses.

We have this manufacturing facility in Pennsylvania that is significantly underutilized.

It's where we manufacture Estrasorb.

And Rahul and Ray Hage have been working hard trying to find other products that we could manufacture in that facility.

And this, if we could accomplish that, not only would it cause revenues to increase, but it would also cause expenses to reduce because it's underutilized.

And so we believe that that is another way that we can continue in going forward in future quarters to kind of cut some fixed cost.

Okay, thank you.

Martin Tross (ph).

My question is -- are you in contact with the federal government in terms of discussions regarding the vaccine?

Yes, we are.

Any progress?

Well, we actually are talking to the federal government and state governments in a number of different ways and we believe that we are getting the proper audiences.

And we are hopeful that we will get the kind attention that we so deserve.

So stay tuned.

Thank you.

Scott Henry, Oppenheimer.

Thank you.

I would just first congratulate you guys on dramatically stabilizing the business over there at Novavax over the past quarter.

I guess the next step is turning stabilization into profit in long-term value.

So I guess some of my questions are along those lines.

First, in terms of other MNP deals, do you have any kind of internal goals?

Are you looking to do one deal per year?

If you can give any color on that.

And then I guess the next question is a little more strategical in terms of the vaccine business.

The trick is always trying to figure out the exit strategy.

Clearly, it's very good technology, but what is your game plan in terms of converting that into revenues?

Is this going to be something you would find in partner and try to get royalties, or you would license the platform?

And then along those lines, it seems like potentially an epidemic type situation, you put out data for October 2006.

But what would be the kind of the long-term traditional route to getting some products approved by the FDA?

I'm going to try to answer your question -- good questions, thank you.

The first one regarding new deals on MNPs.

We have quite a few irons in the fire right now and we're getting good traction, especially after the Esprit deal since that kind of validated the value of the technology.

We expect to announce some new deals hopefully in the next coming weeks.

And in terms of our target, I would not put a target on number of deals, but more on the revenue.

And that's -- ultimately my goal is, and I don't know whether we can achieve that in '06, our goal is to be able to get enough revenue from these MNP deals to be able to cover our G&A and all of the R&D expenses related to that business and then invest any additional dollars into the long-term growth of the companies, such as the vaccine products.

So I'm not sure I'm ready to give you an exact number in terms of what we want to achieve next year, but our goal is that we want to have several million dollars worth of revenue coming through from these deals whether it is through Estrasorb royalties and milestones, or from other MNP deals.

If I could just interject and let Rahul answer the rest of the question.

Scott, as you know, we have I think 10 different products in the pipeline.

And we have made a business decision at the management level to be sure that if we are going to go through the exercise that we have been through with Estrasorb, we're going to have a partner.

We're not going to do it alone.

And as Rahul stated, the validation of the Esprit deal has caused a lot of those discussions that we've been having with these other companies to accelerate.

And we are excited about those discussions and they're with firms you are going to well recognize.

So we hopefully can get some of those to fruition.

How many can we get done?

Obviously, we would like to get as many done in any year as possible, because it's real revenues and real money.

In reality, I think we would be happy to get a couple done each year and shoot for doing three or four.

But we believe that as we do more with other companies, that will further validate this technology and it's kind of a snowball effect is what we're hoping to see and that others will come to the table.

And we are actively out looking for other products to use this technology with.

It's not just a sit back and let them come to us.

We're going to companies and saying, hey, have you thought about this?

And we are seeing some very good traction.

Regarding the second part of your question about what is the commercial strategy for the vaccine business.

I have been in the vaccine business for many years and I know it is very hard for a small company like Novavax to take it all the way.

And so our initial plan would be to partner with a large corporate partner, like one of the big vaccine manufacturers, and I think that is very doable.

We would have to do some more work in that regard, maybe wait until we have clinical data on the flu program, for example, before that can happen.

But I think that would be the longer-term plan.

In terms of commercial strategy for the flu, as you correctly said for the pandemic, having clinical data and being ready for a potential pandemic is going to be enough.

But should that not happen, and I hope it doesn't happen, our backup is to develop the human seasonal flu vaccine using our technology and I think that for a good reason, it might again be best in class for the that product as well.

Because again, we can respond much more -- much later in the year or two which strain to pick for the human seasonal flu vaccine strains, and therefore, have a chance to be more efficacious because you will have probably a better chance to match what the strains will be in the flu season for the human program.

So again, I think we have a chance to be a best in class for the human flu, and so that would be a commercial strategy for us.

Does that answer your questions Scott?

I think that helps.

And perhaps just getting to an even more general question, I'm not asking you to do our jobs, but I think all investors are looking at the vaccine business and trying to put a valuation around it.

I'm just curious, Rahul, if you have any thoughts in terms of your opinion of what the best way to value that technology is?

Again, I think I've had this discussion with you before, but I would look at some of the comparables, like ID Biomedical and Medimmune and (indiscernible) and some of these type of companies and see what value they have, what valuation they're commanding in the marketplace.

And just ask the question, what elements does Novavax have that these other companies have, and how far behind are we from these companies.

And based on that, what kind of valuation we can deserve.

But probably the best way to do a comparable study, probably that is the best way to do a valuation, rather than try to make 100 different assumptions on the cash (indiscernible) evaluation.

Thank you for taking the question.

Lace Aguilar (ph), Investor's Capital.

I have three questions.

I see that your hepatitis E vaccine is now at the end of -- or it's in Phase III.

Can you give us an update on the hepatitis E vaccine?

A hepatitis E program is being done with GSK, and we have a small royalty that we will get on the commercialization of that product.

But the program is pretty much handled by GSK and we have very little input in terms of what the commercialization timeline is of that product.

From what we understand, GSK has completed the pivotal studies, but we don't know what the data look like and we don't know what their plans are, in terms of filing that product, and in which markets they're planning on doing.

Is that also VLP?

That's right.

The material that went into those Phase III clinical trials were produced by Novavax, and they are all based on our (indiscernible) virus and PIC (ph) cell expression technology.

And I believe they are viruslike particles, yes.

The second question is, it seems that there is a new outbreak of H5N1 every day in some part of Asia.

The news reports say that the Chinese are going out there and vaccinating chickens, and seeing as you have got some good animal models for vaccination.

Is there a possibility that your flu technology would be used on animals to vaccinate them against the disease?

That's right.

We believe that, yes, that's indeed the case, that our products will work for poultry vaccination, if necessary.

And wouldn't the standards be lower for poultry vaccination, rather than human?

I suppose that none of the mice died or the guinea pigs or the ferrets.

Yes, they will be lower.

So is that a market that you would pursue as well?

The thought has crossed our mind, but we can only do so many things and we don't want to distract ourselves.

But at the same time, if there is -- we will not stop looking at potential opportunities.

In the larger markets, I think the strategy has been to kill the birds, rather than vaccinate them.

Given the billions of birds, that would be interesting.

One final question is, I see that one of your corporate Board members, Dr. Gale Smith, there's something interesting in his bio where it says, Dr. Smith responded to an emergency request from the NIH in 1997 to produce several thousand doses of an experimental vaccine against H5N1 avian influenza.

So it seems you have some great minds, including the ones on this call presently, but whatever happened with that H5N1 vaccine all those years ago?

Good question, and frankly I don't know all of -- so I don't know whether my information is absolutely correct, but I will try to answer your question.

Gale Smith at that time was the Chief Scientific Officer of a Company called Protein, which is what's called Protein Sciences.

And as you might know, Protein Sciences is using (indiscernible) virus in its (indiscernible) cell technology to produce a recombinant hemogluten (ph) as a subunit, not as a viruslike particle.

And, yes, he did produce some emergency supplies of it.

And I believe that the clinical trials weren't that compelling.

And today, when you look at the results that were achieved from the H5N1 vaccine from Synofi, which required 90 micrograms of the HA as compared to what is required for humans, which was 15, those results are not that out of range.

But at that time because there was no contact, the clinical trials or results were felt to be inferior.

And so I believe at that time, the trials were stopped, or they were discouraged.

But that is all I can say at this point.

But in hindsight when you look at it, those results are pretty much in line with what has been seen today with the Synofi vaccine.

And just so you know, Dr. Gale Smith, he is in charge of our vaccine area.

So his academic background and his business experience are very appropriate for what he is doing.

All that experience that he had in the past is coming in handy now so that he can -- we don't make the mistakes that were made then.

Great.

Thanks very much and good luck.

Looking forward to some great, great future news for you guys.

Thank you very much.

(Operator Instructions).

Brian Hathaway, Hathaway Partners.

My question is, if you could go into the history a little bit of H5N1 development, or H9N2 that your company with the NIH.

And is there -- moving forward, is there a formalized process or kind of a request for proposal program at the government?

How do you get money from the government moving forward?

So the history is that I think in 2000 or 2001, the company applied for a grant with the NIH to study the viruslike particle technology to develop a vaccine against the H9N2 avian flu strain.

And the results that were published this year were basically the results that came out of that study that were done in conjunction with the NIH and the CDC.

So that's the history.

And at that time in 2000, 2001, there was no difference between whether you take H9N2 or H5N1.

Only now, H5N1 has become the more predominant strain.

At that time, there was no reason to pick one or the other.

Now moving forward, there are always requests for proposals by the government outside of what the President has recently said.

And we continue to apply for those types of grants.

But I think, given the emerging situation right now with the avian flu and the new monies that the President has now allocated towards this, the whole process is now quite different than normal.

And we are going to be aggressively pursuing those funds with the help of professionals.

And I think that the process that we will be using moving forward will be much more targeted towards the $2.8 billion that are allocated towards newer vaccine technologies that the government wants to encourage against these types of diseases.

And we believe that these fit very well in that definition, and that's what we will like to target.

Now we are still in the process of finding out the channels through which those funds will be allocated, and rest assured that we're doing our best to make sure that we get it in front of the right people.

Your question is a very good one about how do we get access to it, because it's not like dialing a 1-800 number, give us money for bird flu.

It's a very -- our government's large, it's a very complicated process, there are a lot of different branches of the government involved.

And so as Rahul said, we have recently hired professionals that will help us get our story in front of the right people so that we can have an opportunity to get a portion of these funds. $9 billion is a lot of money and we don't need very much to move our program at a much faster speed.

And that is our -- a significant goal of ours is to figure out how to accomplish that.

Thank you very much.

Perry Niver, Stifel Nicolaus.

Congratulations.

I know that in three months, you've moved this company from totally reactive to totally proactive, and from infirm to financially robust.

That's a hell of an accomplishment.

I look forward to the next three months.

Thank you very much.

I hope we can move as fast the next three, but we are working hard.

Well if you continue this pace, and you'll be taking over Glaxo by the end of '08.

I had a couple of questions.

One, your slide presentation at Rodman & Renshaw yesterday mentioned hypertension as a potential targeted market.

And I was curious what you might bring to the table in terms of MNP and a hypertension drug, as far as an improvement?

Right.

The one product that we currently have in our pipeline which is an antihypertension is clonidine.

And the reason why we use that is because the clonidine molecule has been used very effectively in a transdermal format and we wanted to differentiate our MNP as another -- against that particular transdermal market.

So basically, our initial goal was to really have an alternative to a patch for clonidine, which by the way, sells quite well even now for -- and it has been selling well for many years.

And we were thinking that perhaps a lotion-like formulation might be a reasonable alternative to a patch for certain older people who take -- who have difficulty applying a patch because their skin is very thin.

But one opportunity that still is very compelling in the hypertensive market, antihypertensive market, which is something that we currently I would say we're not pursuing with much gusto right now is what is called combination therapy where a lot of folks who suffer from blood pressure have to take multiple different type of blood pressure medications.

And they have to swallow multiple pills.

And one thing that is potentially compelling is to combine two or three of these in a single formulation and apply that and rub on your skin and get those medications in one application.

That's something that we have heard as a potential application or a potential way to differentiate ourselves, but something that we think is lower on our priority right now.

My second question and my final question is, in regards to the HIV research programs, and you mentioned the University of Alabama, Emory and Duke, but I think there are other universities working on this as well.

Where are these programs at this point, and how soon do you expect anything fruitful from them?

So I'm not going to be able to speak to anything but what we're doing, and our collaboration is with UAB, Emory, Harvard and NIH.

And we are cautiously optimistic that the approach that we're taking on the HIV program, which is essentially the use of VLPs as a protein boost, is a potentially very compelling solution to HIV.

Now we are not in a position to announce any results, but my gut feeling is that in the next couple of months, we will be able to say more about what we have learned in the experiments that have been done so far with at least small animals.

Excellent.

Again, congratulations on a great, great, great accomplishment in the last 90 days.

Thank you for your support.

And operator, we will take one more call.

(Operator Instructions).

Ladies and gentlemen, this concludes the question and answer portion of today's conference.

I will turn it back to management for closing remarks.

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This does conclude the presentation and you may now disconnect.