Novavax Inc (NVAX) 2006 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2006 financial and operating results conference call.

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

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

We will conduct a question-and-answer session towards the end of the conference. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded for replay purposes.

I would like now to turn the call over to Mr. Gary Evans, Chairman of the Board.

Please proceed, sir.

Thank you and thank you, listeners, for dialing in today.

We are very proud to have the opportunity to speak to all of you about our activities during the first quarter of 2006.

I would like to introduce the other members of the management team that will be on the call today.

Rahul Singhvi, our President and CEO, is presently in London, England and will participate in the call as well as the Patricia Hall, our Controller.

When we have the question-and-answer session later on in the call today, we will also have Dr. Rick Bright, Ray Hage and Rob Lee available to answer any specific questions that may come about during the call.

I'd like to just maybe summarize a few things that were significant events and we will go over these in more detail in the call.

The Company was successful during the first quarter in significantly strengthening its balance sheet.

This was a concerted effort of the board and management team.

We actually raised $58 million in new equity capital, and we were successful at converting another $7 million of outstanding convertible notes into equity.

So, that's actually a $14 million turn-around there on just the debt and equity side alone.

We were also successful through this capital raise that we accomplished in attracting some very well-known, sophisticated institutions into our company.

Kleiner Perkins Caufield & Byers, as well as Prospect Venture Partners, both California-based venture funds, did make the decision to put quite a bit of capital into the Company, as well as one of the principles of those firms, Prospect Ventures' Mr. James Tannenbaum agreed to join the Company's Board at our annual meeting that was held earlier -- or actually last month.

So, we're very happy to have him onboard and welcome him as a principle in the business that can give us leadership.

We also were able to strengthen the Company's management team with three new appointments that we will talk about in further length in the call.

Then we made some significant progress as we had been working tirelessly on our influenza vaccine's preclinical programs with both antigen and adjuvant platforms.

Then we were able to respond to an RFP with the U.S.

Department of Health and Human Resources concerning the advanced development of antigens (indiscernible) influenza vaccines.

That was done here just recently.

Then we were able to complete the renovation and validation of our current Good Manufacturing Practices, which is a compliance necessary for operations of a facility up in Rockville, Maryland.

This allows us to have the ability to create capability for manufacturing clinical-grade materials, which are our primary products.

So without further ado, I would like to remind all listeners that we do -- we spent some time putting together a PowerPoint presentation.

It is available on our Web site, so as we go through our presentation today, you can follow it on the Web site.

I don't want to spend a lot of time reading the Safe Harbor language, which we sometimes do; that is completely available on the Web site.

It's quite lengthy and we will be talking about forward-looking statements today, so I would ask that you read that.

So, now I'd like to turn the call over to Dr. Singhvi, who is overseas.

Dr. Singhvi, are you online?

Yes, sir.

Thanks, Gary.

So let me start with Slide number 2.

First of all, welcome, everyone;

I'm very excited to be able to speak to you today and answer your questions after the presentation.

I will begin with the agenda.

We have -- we will describe the strategy, just remind you what our strategy is.

We will go through the operational progress that we've made in the first quarter.

Then I will turn the call over to Tricia Hall and have her describe the financial results for the quarter.

Then I will come back and talk to you about what you can look forward to in terms of key milestones for the remainder of the year. then we will turn over to questions and answers.

So if I can ask you to go to Slide number 4, this slide, which shows the Novavax as a company with the unique capability brand.

I just want to again emphasize to you how we brought all of the assets in the Company together to create this powerful blend, which we believe can result in important new products.

The three key capabilities of the Company has are its ability to create novel lipid-based formulations, its vaccine technologies and its proven track record in terms of drug development and manufacturing.

By combining our formulation and vaccine technologies, we can create important adjuvants, which as you know are competitive advantages in new vaccines.

When we combine our formulation plans with our drug-development capabilities, we can create products, such as, ESTRASORB which we can then license to other companies and get cash flow from that.

And by combining all three capabilities (indiscernible) formulations, vaccines and our drug-development infrastructure, we can then create important vaccines, like the influenza vaccines we will be talking about today.

So the point of this slide is that the Company is coming together very nicely and supporting or synergizing its assets to create very important products.

Our strategy is we want to continue to create value and throw cash at the company through our drug delivery products, as you can see in Slide number 5.

As this technology matures, we want to go to the next growth cycle in vaccines with its first application as the influenza vaccine.

So we continue to grow the Company by [stepping] on new technologies while harvesting the mature technologies.

The key reasons why you all should be thinking about Novavax, as shown in Slide number 6, there are mainly four reasons.

One is that we find ourselves as technological leaders in influenza vaccines because of our platforms, both in antigens and in adjuvants.

Our antigen platform, as you all know, is a virus-like particle platform, and our adjuvant program is giving us products like the Novasomes.

These two platforms can combine together to create a new generation of vaccines.

So that's one of the key reasons why Novavax is going to become a very important company in the future.

Our expertise in formulation sciences can be then taken into account to create not only the adjuvants for our vaccines but also new products.

This can create a cash flow by creating preformulated products like ESTRASORB, and that cash flow can result in reduction in the total amount of invested capital for R&D.

Today, as Gary said, we have a very strong balance sheet.

We're sitting on a cash position of 84 million, which based on our current burn rate should give us enough cash to take us over the development cycle for at least the influenza -- pandemic influenza program if not the seasonal influenza program.

So we feel very secure in taking our -- in achieving the goals that we are setting forward, which are shown in the next slide, Slide number 7, which shows basically the three key strategic objectives for the year 2006.

The first one is leveraging technological leadership in influenza vaccines to achieve the following four (indiscernible).

First is to initiate a development program for pandemic influenza, which we have done; to position the Company to competitively bid for governmental funding, which we have done, and I will speak more about that; to enhance global visibility and garner international support for the Company; and to attract top-notch investors and recruits.

So those are the four [subtext] under the first key strategic objective.

We also want to drive revenue in the Company by harvesting our current products, which include ESTRASORB and Gynodiol, by creating new products using our technological platform of nanoparticle and licensing these to create more cash, to also license our technology and create cash, and finally to take advantage of our drug-development capability and infrastructure to take those assets and turn them into asset -- into cash-creating assets.

So again, I think we've made progress in all four of those categories.

Lastly, we want to continue to reinvent ourselves, so we are tirelessly working to improve our intellectual property estates, both in vaccines as well as in formulation science.

Let me give you a quick update on where we are in each one of these objectives before I hand the presentation over to Tricia.

In the case of pandemic influenza program, on the next slide, which is Slide number 8, you can see that I have defined this slide and used this slide numerous times to show to investors as to why we believe that we can address the three key issues facing the world when it comes to solving the problems created by pandemic influenza.

The first problem is that of a moving target.

As you all know, the actual virus that will ultimately cause the pandemic still is not out there or may not be out there, so until that strain is out there, we can not create a vaccine that will have high fidelity towards it.

So we have to have a technology that can be quickly customized, that can quickly customize to create the vaccine.

That has to be done very quickly.

So that's the first hurdle or the first major problem.

We believe we can solve that problem using our recombinant DNA-based virus-like particle technology.

We've shown that, in numerous presentations, how we plan to do that and how we can reduce the leadtime from six to nine months to less than three months in creating the vaccine.

We have also shown that, by having the recombinant technology, we can express the right antigenic antidotes off the pandemic strain and get a high fidelity vaccine.

So we can solve the first problem using our virus-like particle technology.

The second problem is that of immunogenicity.

You've also heard recently we have two papers come out in the New England journal -- one in the New England Journal of Medicine and one in the Lancet, both indicating that we require, without adjuvants, 90 micrograms of hemoglobin, two doses to get reasonable immunogenicity.

Then the second paper in the Lancet that was published showed that, with adjuvant, you needed 30 micrograms and two doses.

Those are still very high doses and we have to be able to ultimately go to a single-dose vaccine.

We think that we have at least the two in the Company with the virus-like particle vaccine and with a Novasome adjuvant to achieve that goal.

Lastly, the issue of if you have a good vaccine, how do you create large quantities of it very quickly?

There, our solution is that of use of potable manufacturing, which can be commissioned fast in generic facilities and it requires much lower amount of capital and much less commissioning time.

So, these are the three solutions that the Company is bringing forward as a holistic solution to address the pandemic influenza problem.

It's just one example of how the assets in the Company are coming together to create a world-class solution.

Where are we in terms of making this concept a reality?

That's shown on Slide number 9.

We've raised sufficient capital for advanced development of both our pandemic and seasonal vaccine, so we don't have to rely on governmental funding although we are very interested and keenly pursuing governmental funding.

I think Gary mentioned that we have applied for one of the -- we submitted a proposal for one of the RFPs that the government put out for the development of antigen (indiscernible) vaccines.

We should hear back from the government on that proposal in September, and we expect to continue to pursue more government funding, since we believe that we have a very strong and compelling solution for this problem.

We've made significant progress in our preclinical programs with both of these vaccines and in the future would hope to publish these data and present them to the world.

We've strengthened our scientific staff very greatly with the addition of Dr. Rick Bright, who came to us from the CDC and has already made a substantial contribution to the Company.

In addition, recently we announced hiring of Dr. Jinyou Zhang from Merck and Dr. Niranjan Kumar from Sanofi.

All three of these individuals are best in their respective areas as far as I can tell, and by recruiting these individuals to the Company, we are reducing our execution risk in achieving our goals.

We have also partnered with Bharat Biotech in India to expedite our development of the influenza vaccine and by getting more data from people with different immune backgrounds, and therefore strengthening our ultimate dossier that will be used for registration of the product.

Lastly, as Gary pointed out, we have now created a facility with Novavax that can be used to create clinical grade GMP materials that can be used to put into clinical trials later this year.

In terms of the other two strategic objectives as a shown in slide number 10, in terms of driving revenue, ESTRASORB was launched by our partner Esprit Pharma in March of 2006, and based on what I have seen, they have spend a lot of money and we are hoping they will do phenomenally well with selling this product, and we will participate in that success with the royalties will be receiving (indiscernible) sales-based milestones.

We are also happy to report to you that we are aggressively pursuing other partnerships with companies to license some of our other micellar nanoparticle based products, and we hope that, as we partner with these companies, we continue to harvest this technology.

We are also continuing to pursue our own development of pharmaceutical products, which ultimately we expect to license out.

These are non-vaccine products based on the nanoparticle technologies.

Again, in terms of Gynodiol, we still have that as a product in the Company and we continue to sell and generate cash from that.

Lastly, we have had some recent success in contracting some of our manufacturing space in pharmaceuticals to generate some cash, which again helps us reduce our overall burn rate.

Lastly, in terms of our strategic objective to continue to develop our platform technologies, I am happy to report that we have now submitted two new vaccine-related patents or patent application and two new drug-delivery related patents and patent applications, just to show you the our R&D engine is robust, it's running well and it's creating value.

At this point, I'd like to turn over to Tricia Hall, who is going to go over our financials with you.

Tricia?

Thank you very much, Rahul.

I think, as Gary and Rahul both pointed out, from a financial standpoint, the Company's Q1 story can be summarized as it continues to strengthen its balance sheet.

This was accomplished with, first, the 20 million financing deal that we had at $4.35 per share with Kleiner Perkins Caufield & Byers, and Prospect Venture Partners.

That was in February.

In March, we also had a $38 million financing that netted us $36 million at $7.30.

That was accomplished in March.

Also, as I believed Gary mentioned, we did have a conversion of $7 million of notes in March to equity, so that continued to strengthen the balance sheet.

The other significant item in this accounting activity for the first quarter is the implementation of FASB 123R, which is accounting for stock option compensation.

We are now required by accounting rules to expense the fair market value of stock options as a vest over their period of term.

For the first quarter, we recognized an $800,000 expense.

This had an impact of $200,000 in our R&D figures and $600,000 in our G&A figure.

If you move to the next slide, Slide 12, we can go over to keep balance sheet items.

As we mentioned, we have a little shy of $84 million in cash at the end of the first quarter; this is up $52 million from the end of the year.

Once again, this is primarily due to the two financing deals that we had during the quarter.

Our working capital is up to almost to $86 million, up $52 million from the end of the year, once again due to the financing activity.

Convertible notes are now at 22 million, as opposed to $29 million at the end of last year.

Stockholders equity is $109 million; that's up $59 million from the end of last year.

This is the combination of the equities financing, the conversion of debt, as well as some stock options that were exercised.

We currently have 61.4 million shares outstanding, compared to 50 million shares that we had at the end of last year.

If we move on to the P&L on Slide 13, we had revenues for the quarter of 1.3 million.

That compared to 1 million last year at the same quarter.

The revenues for this year consisted primarily of $700,000 of sales of ESTRASORB to Esprit, another $0.5 million in contract revenue for both government contracts as well as our manufacturing facility at Redline road, and we had $100,000 in royalty payments from Esprit for the first quarter in connection with that agreement.

Last year's revenues were primarily from product revenues, both ESTRASORB as well as our other products that have since been divested, as well as -- that was $700,000.

We also had $300,000 for contract revenue during that period of time.

Cost of goods sold for this year was 1.2 million compared to $2 million last year.

So that's a savings of $800,000.

That includes some inventory adjustments that we made during the period.

Operating expenses -- the R&D expenses were $2 million this quarter as opposed to 1.2 million the same quarter last year, so we actually have increased our R&D spend by $800,000.

G&A is up to 2.7 million compared to 2.1 million the same period last year.

It is up by $600,000, but as I previously mentioned, that 600,000 is totally due to the having to account for stock options for this current period where it was not in effect last year.

The other significant transaction is we had $4.1 million in sales and marketing costs last year, where we virtually have no costs this year since we have now changed our business plan and are not into commercial sales like we were in the past, from that standpoint.

So, operating expenses have been decreased by 2.3 million compared to the same period last year.

Our net loss for the period is $5.5 million.

That is down by $3.4 million compared to the 8.9 million of last year.

Earnings per share was actually a loss per share, I should say, of $0.11 this year compared to $2.22 last year.

I think we can summarize on Page 14, but once again, stating that the significant activity is the increase in the strengthening of the balance sheet; that's accomplished by the equity financing and the conversion of the notes.

We continue to increase our R&D spend with a flu program.

We recorded $800,000 of expense for compensation costs in accordance with FASB 123R.

Lastly, the monthly cash burn rate is sitting at around 1.6 million.

We anticipate that to be around that level if not slightly above going forward, as we continue to increase our R&D spend on the flu program.

I think I can turn it back over to Rahul now.

Thank you, Tricia.

In terms of moving forward, as is shown in Slide 15, the milestone that you can look forward to on the influenza programs -- we expect to submit our R&D for the pandemic influenza in the fourth quarter and pending no issues with holidays, we hope to initiate our Phase I clinical trials as well in the fourth quarter.

In terms of revenues, we will be pursuing a second RFP later this year on recombinant vaccines and we hope to hear from the first RFP in September.

We expect to complete new product development licensing deals between now and the end of the year.

We continue to work on those.

We also hope to support the ESTRASORB launch and marketing clinical programs with Esprit.

I should also mention that we are actively seeking ESTRASORB licensing outside of the United States, including Europe, but we don't expect to generate revenue this year but we are actively looking to license.

Lastly, in terms of pipeline development, we expect to report, by the end of the year, that we -- which new product we are adding to our pipeline.

Lastly, we again want to continue to strengthen our IP position by adding more patent applications to our IP estate.

So with that, I'd like to end the conference call's formal presentation.

We will be happy to answer any questions and answers.

As Gary said, we have our management team ready to answer your questions.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS).

Ken Trbovich, RBC Capital Markets.

Just two quick questions, one on the accounting side and the other one just in terms of the RFP process.

With regard to the accounting side, could you give us some guidance as to what we should expect in terms of these excess inventory costs over market and the idle facility costs?

Are those things going to be relatively stable on a quarter-by-quarter basis or how might they change either going higher or lower in future quarters?

Let me take a crack at this, Ken.

I think that those costs above market are based on the fact that these production costs are volume-related.

So, our expectation is that as we -- as Esprit ramps up its sales or sells more product, we will be making more product for Esprit.

So my expectation is that it's going to be either stable going down over time.

Then just with regard to the RFP, I think, if I recall correctly, you mentioned that you guys had submitted the RFP back in May.

Yes.

There was a pre-proposal conference for that RFP.

Can you give us a sense as to the number of attendees and sort of the general tone and tenor of the government?

I mean, obviously, we now know that the government is actually issuing the contracts.

The good news is the money is coming out of the bank and heading into companies for research.

Right.

Could you give us a sense for sort of how that meeting progressed and what you see as the environment?

Sure.

So first of all, let me make one clarification -- that the monies that were recently doled about by the government on the sell-based contracts, you know, there was some confusion as to why Novavax did not receive any money.

I want to just make it clear on this conference call that we did not apply for that RFP because that RFP was last year's RFP which was in a space that was not our space.

We're not just cell-based; we are actually recombinant.

So, the reason why we didn't get any money (indiscernible) RFPS is because we didn't apply.

Second, with regard to this RFP process, the conference that was held and the tone that we heard there was very, very positive for progressive companies such as ours.

They were quite a few companies there, the usual suspects.

As you also heard that (indiscernible) has come out and said publicly that they've applied for this RFP or they submitted a proposal for it.

So those of course are mine and many other companies there.

I would just summarize it by saying that the government I think is very serious about funding innovative technologies like ours after they have taken care of the more -- or less risky prospects of the cell-based prospects.

So, I'm cautiously optimistic that the government is now going to turn from -- away from the big manufacturers and support innovative companies such as ours, but only time will tell.

Did they give a sense, I guess, specific to the relative size?

I mean now that we know what the contract sizes are for those cell-culture vaccines -- (multiple speakers).

Right.

I think -- and again, this is a bit of a speculation but the order of magnitude is that the total amount of money for that antigen-sparing RFP that will be doled out is approximately 150 million.

We expect that they will get two or three contracts, so the contracts should be in the range of 50 to 70 million, 75 million.

[Vernon Bernadino], Rodman & Renshaw.

I just wondered if you could give a few details and characterize exactly what the product was that proposed for the antigen-sparing RFP?

Sure, I think we've described several times in our presentations that virus-like particles in and of themselves are antigen-sparing because they are more potent as compared to other types of antigens.

We've shown that in (indiscernible) rat model, which we've shown publicly that we've been able to get protective levels of immune response in that model with as low as 0.6 micrograms of HA high hemagglutin with a single dose.

That is indicative of the fact that virus-like particles mimic whole viruses, which have been known to be more immunogenic than (indiscernible) and gives us hope that by use of virus-like particles in and of themselves as an antigen strategy is antigen-sparing.

In addition, we supported that technological platform with our Novasomes that when we use Novasomes in addition to VLPs, we get a further improvement in immunogenicity, so that acts as a risk mitigator for us, that we have an antigen platform that in and of itself is antigen-sparing, and that we have as a backup an adjuvant that synergizes with that antigen to further reduce the dose.

So, that's the fundamental point of our proposition.

Great.

Would you expect to present any data on the Novasomes part of the program at all -- (multiple speakers)?

Absolutely.

I think once we've taken care of our IP submissions and -- (multiple speakers).

I see; it's a competitive issue.

Yes.

Scott Henry, Oppenheimer Funds.

Thank you.

I just had really some modeling questions.

First, with regards to ESTRASORB, do you have an end-user revenue number there?

I know you report royalties as well as some manufacturing revenues.

Additionally, I'm just looking at some of the lines and I'm curious if you have any guidance with regards to SG&A and R&D for the full year, as well should we expect any kind of boluses of milestones to come in any time soon?

Scott, it's good to hear from you.

Let me first of all, in terms of bolus, I think the big boluses if it comes, will be the (inaudible) awarded in the government contracts later this year.

That will be a big bolus.

But in terms of spending, I think it's going to be relatively constant, maybe a little higher R&D spending on flu as we start to go into the clinic later this year.

Tricia, maybe you can augment that statement by some of the other things he is talking about.

Yes.

I think, from a G&A standpoint, we will not have as high of FAS 123R charge in the later quarters as we did this quarter.

Some of our options were performance-based so we took a bigger hit this particular quarter.

But other than that, G&A spend will be very consistent, like as Rahul mentioned, the R&D expenses particularly in the third and fourth quarter will start to climb for the flu program.

Also, on the ESTRASORB, can you repeat what exactly your looking for there, Scott?

Well, I'm just trying to get an understanding of how all of the numbers work through your income statement.

It looks like you put a manufacturing revenue into product sales, and then the royalty comes into that combined milestone royalty line.

Right.

Right.

Right, right.

Some product sales is the transfer price.

So what we are selling to Esprit on our fixed transfer price is what we are claiming as product sales.

Then the royalty number is what we're getting in terms of their -- the piece of their sales.

In addition, I think as was mentioned that Esprit just launched the product in March, so the royalties should be continuing to increase as they are selling increases from that standpoint.

Thank you.

Have you given any clarity on how the transfer price is?

I mean, is it 50% or do we have any color on that at all?

I'm not sure -- 50% of what?

We haven't given any guidance on transfer price.

Thank you for taking the questions.

(OPERATOR INSTRUCTIONS). [Terry Neiver], Stifel, Nicolaus.

Congratulations on a very good quarter and excellent forward progress.

I'm not clear.

You seem to be running two programs simultaneously, one United States program and another program with India and your partner there.

Do you have a timeline for what you're trying to accomplish in India?

Right.

So first of all, I think the confusion about whether are we spending money to do this program (indiscernible), no.

The Indians are going to spend their own money in moving that program forward.

The real benefit of getting them involved is that we will have simultaneous generation of clinical data by having the Indian company do the clinical work in the Indian population.

So in terms of timelines, we expect that they will get started around the same time as us, but there is the possibility they can start sooner.

We are at this present time going through some registration issues with the Indian government, so it all depends on how quickly we can get the Company registered and how quickly we can get the program started over there.

But the idea is to rapidly get into humans in India and generate clinical data so that we can rapidly reduce our oral scientific risk, (indiscernible) the products working in man.

What kind of -- I mean, you could pretty well guess that ordinarily here in the United States how long it would take to get into humans, but I'm not familiar with India.

How long could it potentially take, optimistically, to get into some form of human testing?

Well, it's remarkable how quickly that country has made progress with regard to doing clinical trials.

The people that we are working with, both with (indiscernible) Biotech as well as with the Indian government -- they are telling us that the overall efficiency with which they can do the clinical trial in India can match or exceed what we're doing in the U.S.

Now this is again something -- it's a promise and is something that we have to test, but based on what they have shown me with programs on Rotavirus vaccine, I'd remain again very cautiously optimistic that we can do this in a very efficient manner in a matter of a few months.

Wow!

Did I understand that you were doing some joint work with the Centers for Disease Control, as far as research?

Where does that stand at this point and how much is going on there?

We have a great application with the CDC which is currently in process, so we expect to hear back from them shortly and when we hear back, we will let you know.

When you hear back, what specifically will you be hearing back on?

It will be a cooperative research agreement where we will be basically using their capabilities and our capabilities to generate data that we would not be able to with our capabilities alone.

Specifically, the kinds of capabilities that the CDC brings to the table is the use of live avian influenza viruses in their very high I guess -- (multiple speakers) -- pathogenic laboratories.

But Rick, you may want to point out on that.

Yes, that's why we are using the CDC working with since they have access to the viruses that we are actually intend to make a vaccine against.

Being able to use their high-containment facilities with these selected agents is a critical component for testing the efficacy and effectiveness of our vaccines.

I imagine it would be, yes.

Yes.

Then one last question -- you had several HIV programs going.

What's the status of those programs?

I think we have announced in the last (indiscernible) the month of March that we had a renewal of our HIV grant from the NIID.

I think we're one of the very few companies or very few centers that have gotten an HIV vaccine grant renewed.

That should be an indication of how well that program is going.

Since we have a number of different collaborators on that program, we are not at Liberty to announce those results without consent from these collaborators.

So all I can say is we remain very encouraged with what we are seeing in HIV virus-like particle vaccines and at the right time, we will make them public through a publication.

What would the right time look like in your estimation at this point?

I mean, how long will the wait be there?

I think that we should be able to make some sort of public disclosure in the next six months.

Super.

Thank you very, very much, and congratulations again on a system of successes.

[Cole Eckhart], Sanders Morris Harris.

You mentioned that you were aggressively seeking partners with some of your other products.

Is that the ESTRASORB type of product platform?

Yes.

Will you be able to characterize where we are in some of those negotiations?

I would characterize them as late-stage negotiations.

Thank you.

[Bernard Varvalla], Private Investor.

Good morning, gentlemen.

I'd like to commend you for where the Company has come since last August.

I think sometimes it's easy to forget that when people get impatient for more progress, that it's been an amazing nine months and we look forward to going forward.

I'd like to give you all an opportunity to address something that I know has irked quite a few shareholders, and with a public quote attributed to the first analyst that spoke today.

I will be very careful to quote from the publication in which it was printed so as not to color it, and I would like the response from any of you who care to comment.

I quote from Forbes, "Novavax likes to position itself as a technological leader in the Avian Flu market, but closer examination of its competition reveals many companies whose efforts in this area are for more advanced than Novavax's."

Said the analyst.

I guess I'd like to know if doctors Bright, Kumar and Zhang have joined a sinking ship.

Certainly they would have been able to make the same examination as the good analyst.

So I would please appreciate greatly any comments you might have to that.

I know it would be appreciated by many shareholders out there.

Thank you very much, gentlemen.

This is Gary Evans.

I will take a first stab at this and I know some others on the call would like to response.

First of all, we try our best not to respond to direct publications.

There are a lot of good things said about us and occasionally there will be something negative said, and what we have to do is run the Company the best way we deem fit for the enhancement of shareholder value.

As one that can speak from my own pocketbook, I have been one of the largest buyers of stock at Novavax since I became Chairman and have tried to provide some leadership to the fellows that are really doing the day-to-day work.

Every time I have a board meeting, every time I have a management meeting, I get more and more encouraged about what prospects exist for this company.

I've been on this company's board over five years and I've never seen excitement on the scientific front as I witnessed today.

So, from the standpoint of -- it doesn't take a rocket scientist to figure out that for these gentlemen who are all scientific experts in their own fields and their own expertise to come on board our little company tells you something.

They are excited about our science and they are excited about what we're trying to achieve.

It's not only attempting to make money for oneself and our shareholders, but I mean this company could -- we could literally solve a world epidemic.

I know I'm extremely excited about our prospects and it's not just Avian Flu.

There's a lot of real, deep science in this company.

I just don't think it's fair for us to respond directly to one particular analyst one way or another.

We just have to perform, and that's been one thing I try to continue to impress upon a management team, is quit worrying about what people say.

If you perform, the cream will come to the top and people will realize what we have accomplished.

So we're on that front; we are continuing to build the scientific team and we're continuing to do the things that are appropriate to allow this company to be a success.

I am a tremendous believer in what this management team is doing.

Rahul, do you want to respond?

Sure.

Well, first of all, thanks for that question and to give us an opportunity to response.

I actually respect Ken Trbovich quite a bit; he speaks with a great amount of research and he does a very hard -- he does very hard work in coming out with his reports.

In this particular situation, we tend to disagree with his assessment.

I think part of the reason may be that we just haven't had enough chance to educate the world in terms of what we have.

I think this forum gives us an opportunity to tell you again how important the work that we are doing and how different it is and why it is totally a quantum jump from the current technologies.

I think the best person to really address this is Rick Bright, because he came from CDC and he has had visibility to pretty much every vaccine program, so I would have Rick respond to the scientific merit of our vaccine program.

Rick?

Thank you, Rahul and Gary.

That is a good question, and I don't really want to elaborate too much on it other than to say that I like to think, with all the years of experience I've had working directly with avian influenza and human influence viruses and pandemic and seasonal influenza vaccine candidates, I am confident in my decision to join Novavax.

I'm confident in the progress we're making, and I certainly do not feel part of any sinking ship.

I know we're going to get to our goals, and we are working diligently at getting there.

Well, I appreciate all your responses and I guess I will leave it to say that I would agree with Gary; it didn't take a rocket scientist.

Thank you very much.

Vernon Bernadino, Rodman & Renshaw.

Operator, I think we will take just one more question and then we will close.

(OPERATOR INSTRUCTIONS)

Okay, if there are no more questions, I would like to thank all of the listeners for dialing in today.

We are excited about the Company's prospects.

We look forward to reporting to you our activities here over the ensuing months and please don't hesitate to contact our Investor Relations department if you have any additional information you may need or any other specific questions.

We will be happy to respond.

Thank you.

Thank you.

Operator, do you want to give the replay information?

Yes.

Thank you for today's participation.

This concludes the conference.

For a replay, we have a toll-free number, which would be 1-888-286-8010, and the replay for the conference will be available within an hour from now.

So we're looking at 12 PM Eastern standard time.

Okay, thank you.

Thank you all.

You may now disconnect and have a great day.