Novavax Inc (NVAX) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Novavax 2007 annual and fourth quarter results conference call. My name is Matt and I will be your coordinator for today. (OPERATOR INSTRUCTIONS). On today's call will be Mr. John Lambert, Chairman of the Board, Dr. Rahul Singhvi, President and Chief Executive Officer, Len Stigliano, Chief Financial Officer, and Jim Robinson, VP Technical and Quality operations. Novavax, please proceed with your call.

Statements herein relating to future financial business performance, conditions or strategies and other financial and business matters including expectations regarding revenues, operating expenses, cash burn and clinical developments and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Factors that may cause actual results to differ materially from the results discussed in the forward-looking statements or historical experience include risks and uncertainties including the Company's ability to progress any product candidates in preclinical or clinical trials, the scope, rate and progress of its preclinical trials and other research and development activities.

The scope, rate and progress of any clinical trials we commence, clinical trial results, even if the data from preclinical trials is positive, the product may not prove to be safe and efficacious. Novavax pilot plant facility is subject to extensive validation and FDA inspections which may result in delays and increased costs dependent on the efforts of third parties, risks that the company may not be able to secure by its non-strategic or that the Company will be able to negotiate a profitable sale with such a buyer, dependent on intellectual property, competition for clinical resources and patient enrollment from drug candidates in development by other companies with greater resources and visibility and risks that may lack the financial resources and access to capital to fund our operations. Further information on the factors and risks that could affect Novavax's business, financial conditions and results of operations is contained in Novavax's filings with the U.S. Securities and Exchange Commission which are available at the www.SEC.gov. These forward-looking statements speak only as to the date of this earnings call and Novavax assumes no duty to update forward-looking statements.

Mr. Lambert, please proceed with the call.

Thank you. Good morning and welcome to the Novavax conference call for our 2007 fourth quarter and annual earnings discussion. Before Rahul gives a more detailed update on the business I would like to make some introductory remarks. A year ago Novavax was a fledgling company with dreams and aspirations of becoming a bona fide vaccine company with just one vaccine in preclinical studies for pandemic or avian flu. In the last 12 months we have placed our first vaccine in humans with positive proof of concept interim results with our pandemic flu vaccine. We are poised to have our second vaccine to seasonal flu commence human clinical trials in late second quarter or early third quarter of 2008. We also have two promising vaccines in early discovery phase of development.

In addition to our clinical progress, we have strength end considerably or intellectually property position, signed another agreement with GE health care and are completing our new GMP facility to showcase what we believe to be our unique manufacturing platform. I am extremely pleased and proud with the progress the Company has made over the past 12 months by any standards or comparisons it is quite remarkable. Our goals for 2008 are just as ambitious and I will let Rahul explain them to you during this call. I would now like to turn the call over to Rahul.

Thank you, John, for those opening remarks. As outlined in our press release this morning, the Company made major advances during 2007. This press release is quite comprehensive and it outlines these accomplishments in greater detail but in this call I would like to focus on three key areas, clinical results, our GE Health Care collaboration and the sale of our Estrasorb-related assets. Jim Robinson, our head of manufacturing will update you on our progress in our process development and manufacturing and Len Stigliano, our CFO will follow with the financial review.

Clearly, the highlight of 2007 was the interim results from our first VLP vaccine candidate against H5N1 strain of influenza virus in humans. These results demonstrated that our H5N1 VLP vaccine was well tolerated and immunogenic in the healthy adults enrolled in the study. It is important to note that the immunogenicity assays for the study were conducted at the Southern Research Institute or SRI which has been supported by the Centers for Disease Control and prevention and the world health organization for conducting serological assays for pandemic influenza for vaccines. We're commencing enrollment of stage B of this study to find an optimal dose for immunogenicity and we continue to collect safety data from the subjects in the trial. We expect to enroll the second portion of this trial quickly and anticipate having immunogenicity results by early third quarter of this year. Safety data will continue to be collected through the balance of the trial which is estimated to be completed in the fourth quarter. Our trivalent and seasonal flu VLP vaccine program continues to progress in the preclinical stage of development. Clinical data from our H5N1 influenza vaccine have enabled the prospect of initiating our seasonal influenza vaccine clinical program with a Phase II randomized dose ranging study. We expect to start enrolling patients by early third quarter with initially immunogenicity results by late third or early fourth quarter. As previously noted, since the H5N1 virus is a strain of birds, it is not very immunogenic in humans due to species differences. The fact that we observed a good immune response with this strain of VLPs gives us confidence that we will also observe favorable immunogenicity with our seasonal influenza VLP vaccine which consists of human influenza virus antigens. Our two vaccine programs in early discovery phase of development are progressing well and we expect to advance at least one of these program to late stage preclinical studies by the end of this year.

Just a quick word on our VLP technology platform. VLP is a proven vaccine concept and this concept is behind the highly successful marketed product from Merck called Gardasil which is a vaccine against HPV. Our VLPs are developed without antigens using the same concept, as a result we believe that our VLP approach should lead to a clearer regulatory pathway for all our vaccine programs.

On the commercial side, we are excited to report on our innovative collaboration with GE Health Care to market our pandemic flu vaccine solution. As you know, several countries around the globe are interested in creating a domestic infrastructure for production of flu vaccines to ensure they have a high level of control and readiness to -- for potential pandemic vaccine on demand. We are uniquely positioned to provide such a solution with our GE Health Care collaborators combining the strength of our VLP platform with GE Health Care's disposal bioprocess equipment to create low cost manufacturing capacity and lower ongoing product cost without requiring the sophisticated infrastructure common in biotech facilities. We are excited that GE has chosen Novavax's technology to co-market such a unique pandemic in border solution to various international countries. We have commenced the joint marketing efforts and we hope to provide progress reports in this endeavor over the coming quarters. Lastly, in the fourth quarter we announced that we would be exiting the manufacture of Estrasorb from our Philadelphia Manufacturing facility. We also announced that we were attempting to monetize our drug delivery technology and product assets. In February we accomplished this goal at least partially by selling our manufacturing assets for Estrasorb and certain patents to Graceway Pharmaceuticals LLC. This transaction has generated nondiluted cash for the company and has allowed us to further focus our efforts on our vaccine business.

Now I would like to turn it or to Jim Robinson, our head of process development and manufacturing.

Thank you, Rahul. And good morning, everyone. I'm very pleased to report on the progress we made in the last year and to summerize where manufacturing is today at Novavax. We spent the majority of our time since last March working on the pandemic influenza VLP vaccine. This focus has allowed us to show significant progress with this product. Our development efforts have improved process yield nearly 30 fold in that time and we now have a process that is significantly more productive than inactivated pandemic influenza production in eggs. Our rapid advancement in yield improvement indicates that we have not yet reached a full potential this process has to offer in the influenza production. However, we are already in an economic yield level required to commercialize this product if we are successful in the clinical development and FDA licensure. That said we still expect additional yield improvements this year.

Next, we have accumulated safety data-- stability data for our influenza VLP that is more than sufficient to support the product in the marketplace as well as stockpiling. And finally, we have developed a process for pandemic and seasonal influenza production that can be implemented using a flu disposal production system that is all equipment that contacts the product during manufacturing is disposal and ready to use and this equipment does not have to be cleaned and sterilized between product batches or between different product campaigns. Maintaining disposable process equipment allows Novavax to build a facility with less capital investment and in less time than traditional manufacturing approaches in vaccines. It also reduces labor and utility requirements allowing the Company to support production efficiently relative to traditional vaccine manufacturing processes. We believe that this provides Novavax the leverage to compete against what are normally high barriers to entry in the vaccine industry.

The manufacturing process that we have developed for pandemic influenza vaccine is a platform process. We have already demonstrated that the same process used in making pandemic influenza VLP vaccine is effective for making seasonal influenza VLP vaccine by producing the new clinical lots for our upcoming Phase II study. Likewise our work and focus on pandemic influenza will benefit and apply to the manufacturing processes of all of our VLP vaccines. In fact, the same process now used for producing SARS and HIV VLPs, which our discovery group has made for some of our research contracts with outside collaborators is the same process that is used for making influenza VLPs. Every day focused on improving one of these processes advances the others and the platform overall. The platform provides a strategic advantage in developing and commercializing new products.

In addition to this development work we have been busy with the construction and qualification of our new pilot plant. This 5000 square foot renovation of our headquarters facility will be mechanically complete this month and expected to be operational for clinical production by midyear. Many of you may have expected completion by the end of 2007 per our original plan. We were delayed a few months due to permitting issues and were able to make up some of that delay during construction. We have also accelerated the qualifications facility to keep the overall project on time. The facility allows Novavax to upgrade its development, scale up, and clinical production capabilities, as well as to support an eventual product launch with capacity for more than ten million annual trial doses of seasonal influenza vaccine. As mentioned earlier, using this platform process, the facility can support multiple products with the same equipment used for pandemic influenza project. This is flexibility we expect to enjoy well in -- as well in our eventual commercial facilities. In addition to bolstering our technology capabilities, the modified facility allows Novavax to consolidate its team in a single location, which we expect will further speed the development of future products and optimize collaboration between the development into several groups in the Company.

In closing, after making hundreds of millions of doses of influenza vaccine the hard way, in eggs, I can easily say that this one year at Novavax has shown me a very different and exciting approach to influenza vaccine production. This approach has the potential to revolutionize the influenza vaccine industry and I'm excited to be part of the team to make this happen. Now I'd like to turn the call over to Len Stigliano, our CFO, to discuss the financial results.

Thank you, Jim. I'd like to give a brief synopsis of the fourth quarter and annual results for the Company. I would also urge our conference attendees to read the press release of this morning and our Form 10-K which will be filed by close of business Monday, March 17th. As we decided to cease continued production of Estrasorb in the fourth quarter of 2007 for financial reporting purposes all activities around Estrasorb have been classified as discontinued operations for fiscal 2007 as well as prior years which have been restated as required by GAAP. I'd like to add another point. I've had a couple of inquiries this morning about how the discontinued operations will be cut by quarter on a restated basis for 2007 and I just want to let you know that in the 10-K that's filed on Monday, the quarter split out on a restated basis will be in the back of the financial statements in the footnotes.

Revenues for the fourth quarter were 396,000 consisting principally of contract research slightly below 2006 revenues of 471,000. Total operating expenses for the fourth quarter were 7.1 million as compared to 6.5 million in the prior year. The increase in expense was principally due to higher expenses in research and development as we advanced our vaccines and preclinical and human studies. As a result, the operating loss from continuing operations for the quarter before interest was 6.7 million as compared to six million in the comparable 2006 quarter. The increase once again was due to higher research and development expenses. In addition, loss from discontinued operations, that is, the costs surrounding the Estrasorb operation, was 2.8 million for the quarter as compared to 0.8 million in the same period in 2006. The increase in the loss was principally due to a noncash write-off of certain manufacturing assets related to Estrasorb that were not sold to grace way down to their net realizable value. If you recall in our last quarterly earnings call, we stated that there would be some write-down of assets but at that time they were not quantifiable. As a result, total net loss after discontinued operations for the fourth quarter was 9.2 million or a loss of $0.15 per share.

On a full year basis, revenues were 1.5 million as compared to 1.7 million in 2006. Total operating expenses were 31.7 million as compared to 22.9 million in the prior year. The increase in expenses was largely due to, again, increased spending in research and development, additional rent expense for our new headquarters in Rockville, Maryland and associated personnel costs. Loss from continuing operations before interest was 30.3 million as compared to 21.1 million in the prior year for the reasons explained previously. Losses from discontinued operations were 6.2 million or 2.7 million higher than 2006. The increase in part was from previously mentioned noncash write-off of manufacturing assets associated with Estrasorb as well as lower production in 2007 versus 2006 due to lower requirements from our licensee Allergan who was successor in interest to Esprit Pharma who had the marketing rights to Estrasorb until the sale of the product to Graceway in February of 2008. Accordingly, net loss for 2007 was 34.8 million or a loss of $0.57 per share.

Total cash, cash equivalency and short-term investments were 46.5 million as compared to 52.3 million at the end of the third quarter. The total burn rate for fiscal 2007 was 27.1 million or approximately seven million per quarter. The burn rate will accelerate in fiscal 2008 as we advance our influenza vaccines in human trials. As mentioned in our press release, the Company believes we have sufficient cash to fund contemplated operations through the first quarter of 2009. In addition, the transaction with Graceway Pharmaceutical LLC announced in February 2008 will generate in excess of two million in cash over the first six months of 2008. The Company expects it will raise additional capital in the future through sale of equity securities and or other nondiluted funding. Now I'd like to turn it back over to Rahul for his summary comments.

Thanks, Len. In summary, we made significant progress in our vaccine development programs as well as manufacturing and commercial areas in 2007 and we are excited about 2008. This is a year we will advance our seasonal and pandemic flu vaccine programs through Phase II by the end of the year while we pursue commercial opportunities with our pandemic vaccine with GE Health Care. Vaccine is a great space to be in at the moment. It's a fast growing sector of the pharmaceutical business and because we are developing products to prevent disease rather than treat them, we are in a position to address the growing issue of health care spending in a positive way. And in this economic climate, we are really well positioned to continue operations. With our proven VLP and production platform technologies, we have the potential of making a significant impact in the vaccine market and with a number of new vaccine candidates, 2008 will be a big year for us to continue our momentum and advance in clinical and commercial activities and we look forward to updating you on our achievements as they unfold. This completes our prepared comments and we now would like to open up the conference to question form our participants.

Thank you. (OPERATOR INSTRUCTIONS) . Please stand by for our first question. Our first question comes from Ken Trbovich of RBC Capital Markets. Your question, please.

Thanks for taking the question, Rahul. I guess I was looking to perhaps get an update on the shingles program, where we're at there and how things are progressing.

Sure. We continue to optimize our preclinical candidates. We have a number of them at the moment, and we are doing animal experiments to look at the immune responses from these candidates and once we find the optimal one, we will take it forward. But at the moment we are still in what we consider lead optimization stage.

And just with regard to the manufacturing improvements that you guys have been able to see, I guess, over the last year, does that give you greater confidence from the standpoint of other vaccine candidates as you move beyond pandemic and the seasonal flu in terms of leveraging the disposable manufacturing capability?

Yes. I would say so and I would ask Jim to fully elaborate that. As Jim mentioned in his prepared remarks that everything that we're learning with the pandemic and seasonal flu vaccines is applicable from a production and process standpoint to other vaccine candidates. Jim, if you have anything else to add.

No. I would just repeat the same.

And then just to be clear, I guess the comment that was made about the pilot facility, if I heard you correctly, it was 10 million [trivalent] vaccines.

Yes.

On an annual basis.

Yes.

What would it take if they already had clean room facilities to sort of drop in these bags and to sort of set up the facility? Is there any other special equipment or handling that's required or is it simply the clean facilities and access to the air and water handling?

(inaudible - technical difficulty) The -- all you really need is a fairly basic facility. We have set this up by renovating some previous wet chemistry labs and I've done a renovation and the equipment is free standing, it only requires electrical utilities. So it does not need the complex infrastructure of most manufacturing processes, stainless steel piping, the steam systems, et cetera, because they're closed systems. As well the air systems don't need to be the same level as would be required and because our product is not pathogenic in humans, we also don't need to be making our flu vaccine in a containment facility. So we have a number of advantages from our technology which directly apply to flu and will also apply to other vaccines. The ability to make a vaccine without using the live target virus is a great advantage.

Sure. And then just one last question for Rahul on the pipeline candidates side and obviously you guys have disclosed the shingles program. Any chance that we hear more detail on the second program?

Yes, Ken. We've had some discussions internally and we've decided that we want to disclose that program only after we've gotten proof of concept data in animals and that's based on just competition and other reasons that, that's the phase that we would like to disclose it. I just want to make sure people understand that the program is alive and well and it's progressing well. It's just that that's the time that we plan to announce it.

Sure. So does that mean that the IP -- because I know the inner loop had been an issue -- IP had been a position in the past. Does that mean it's secure, then?

We have very strong IP in that area. Yes.

Okay. Thanks.

Yes.

Our next question comes from Navdeep Jaikaria of Rodman & Renshaw. Your question, please, Your line is open. You may want to check your mute button.

I'm so sorry. I had the mute button on. Thanks for taking the question. Rahul, can you delve a little bit more into the seasonal flu program, what sort of studies do you anticipate after Phase I/IIa and can we expect data before the '09 season, flu season, or what's the time line on that front?

The kind of studies that we're contemplating are beyond the Phase I/IIa, which is basically a safety immunogenicity study at different doses. After that, the next kind of study will be head to head studies with existing vaccines in different populations. We're look at the elderly population and look for comparison between our product versus an established product. And then the next study is going to be the efficacy study during a season and those studies we have not announced the time lines for at the moment and when the time is right, we will announce the time lines for those studies.

And you expect to start some in the -- this year, in the second half, is it?

That's the plan.

Yes. And what about the the pandemic flu? Any additional patients being enrolled in the dose ranging study and what doses are we looking at and when is the immunogenicity analysis going to be released, et cetera?

Sure. The doses that we are looking at in this stage B part of the study is 15, 45 and 90 micrograms of HA and we expect to have data back in the third quarter of this year for all three doses.

Okay. Great. Thank you so much.

Thank you.

Once again, ladies and gentlemen, if you'd like to ask a question, please press the 1 key. Our next question is from Kevin Degeeter of Oppenheimer. Your question, please.

Good morning, guys.

Good morning, Kevin.

A number of my questions have been answered, but maybe one or two more here. With regard to pandemic flu, can you comment on any either active RFPs that are out there from governments outside the U.S. or just sort of give us a sense of what the landscape is in terms of sort of reaching our local demand for production of pandemic flu vaccine and just so we can begin to get a little meat around the opportunity here in the near-term.

Kevin, as a matter of policy, we don't comment on -- on whether or not we bid on any RFPs, so I think that if you go on the [HSS] website you can see for yourself if there are any live RFPs on, but we don't comment on whether we have applied to them or not. In terms of other commercial opportunities for the pandemic flu, we are looking at nongovernmental organizations to seek funding. We are also looking at, obviously, the GE Health Care channel to generate funding through the international countries and the agreements that we've laid out in this call today. So there are a number of different ways we are trying to monetize our pandemic vaccine. I think it's going to be a little bit more time before it becomes more clear, but suffice it to say we are very aggressively seeking funding for this program.

I mean, and just in terms of setting investor expectations here, what sort of time frame is realistic to hope to see some revenue, some economic contribution through the relationship with GE or is it just, too early to comment?

I think our goal is that within this year we want to at least have advanced discussions with at least one country. We may not be able to finalize that and have an agreement, but because of the obvious complexities related to these type of transactions, but I think our goal is insofar as whatever is in our control, we want to at least be in late stage discussions with one country this year.

Terrific. That's really helpful. One or two more housekeeping items, if I may. With regard to the pilot manufacturing facility, yes, help us understand, you know, what the steps with regard to FDA inspection, et cetera, that we can hope to begin to check off here to get the facility online, where we stand and what kind of needs to be finalized.

I'll have Jim comment on that one.

Typically you don't get a lot of feedback from FDA until you actually submit a license. Being in D.C., we may have the opportunity to reach out to them to have earlier looks at our facility, but in general the plans we have for the product are to, obviously, demonstrate the product processes in the new facility, to do our process validation and then, obviously, that leads to our consistency lots, which would be the last stage of clinical testing beyond the trials that Rahul mentioned. It's after that we submit a license application and have -- would be subject to a preapproval inspection.

And two financial questions for Len. How should we think about the remaining assets that are, held for potential divesture here? Are we optimistic we can come to some sort of agreement there or are those situations that may be a little longer term to monetize.

We think there's some additional value here and we are in dialogue with certain companies, but whether or not we're successful or not, I really -- I really can't give you a hard and fast answer. I mean, we're still -- (inaudible - technical difficult) we would hope to have something done over the next six months and then just be done with the whole thing. That's our goal. But other than that, I really -- I really can't add too much more for that because I would just be speculating.

That's helpful. And I know you don't provide quantitative guidance with regard to 2008 financials. But perhaps could you walk us through qualitatively some things to keep in mind as we model out through the year with regard to timing and just growth of expenses.

Is your question milestone or expenses?

Expenses.

Oh. Yes, as a general rule, the spending will accelerate during the year. For example, we're just starting up a stage B which will be in March so first quarter will be the lightest quarter and this is assuming everything advances on plan, by the way. First quarter will be the lightest and second quarter will be higher and third quarter will be higher than that and fourth quarter will be higher than that and the reason is we'll have most of the activity in the pandemic will be in Q2 but it will spill over to Q3 and then of course we'll start a seasonal program in Phase I/IIA and then we hope to start another trial, a 2B trial later in the year. So in order to sequence directionally, that's how the spending is going to flow. It's going to be more like a hockey stick rather than a straight line. So hopefully that helps you.

That's perfect. Thanks a lot, guys.

Okay.

Our next question is from Navdeep Jaikaria with Rodman & Renshaw.

Thank you. Just a follow-up on the previous caller. Now, so let's -- I want to get more color on the R&D expense. You said it's going to be like a hockey stick. So should we assume the fourth quarter expense as a guideline, as a base, sorry, going forward? For the first quarter in '08?

No. First quarter is going to be -- as I said before, the first quarter will be lighter because we're just starting the stage B trial, so Q1 will not be indicative of the year. You're not going to be able to annualize that quarter.

No I mean -- I'm sorry. I didn't ask the question --

You meant 2009?

No. I meant the 2007 fourth quarter R&D, can we take that as the first quarter base R&D expense and then build upon that?

Yes, that's probably -- I mean, without looking at it to give you a high level answer, yes, that would be plus or minus. It should be close and then after that it will accelerate. Yes, that's a pretty good estimate.

Great. Thank you.

All right.

Next question is from Ken Trbovich of RBC. Your question.

Yes, thanks for taking a follow-up. Jim, I guess this one is really for you. I was wondering if you could perhaps dig a little deeper into the detail around the yield enhancements and perhaps give us some sense as to the differences in the yield in terms of the explanation perhaps for why it is that you're able to get these improvements and you think that further improvements are possible and then, to the extent possible, perhaps give us some background as it relates to issues either in stability while these batches are being produced or consistency from batch to batch as it relates to your experience with egg production.

Sure. Sure can. I'll try and answer all those questions. If I don't remember them all, you'll have to remind. I'll start with consistentcies that you mentioned last. We've seen incredible consistency batch to batch with respect to purity and yield so we're very confident that the process is robust and something we can really build upon. Our approach for improving has been twofold. First the upstream. If you don't make the product, you can't purify it and recover it, so the focus there has been on increasing cell density, optimizing the clone itself and we've again we made remarkable progress there, probably two to threefold as the improvement has been in that area and that's where I think the future improvement will continue to come. As we go to higher cell densities, et cetera. The downstream improvements have been pretty remarkable.

We made a significant alteration of our downstream process in order to improve the yield and that's where again about eight to tenfold over the improvement has come in downstream and there's still a bit of improvement I believe we can make there, maybe another 50% in overall process improvement. But again the other I think the major improvement here is while doing that process improvement, we've been age to show that we haven't impacted the product purity profile or stability in any way and so, again, that change was although it was a significant change with respect to outcome, it was a subtle change with respect to process. So, again, where we are now is something that we know is concertedly better than any data that's been published or presented at meetings with respect to either cell culture or egg-based influenza. I think one of the reasons we can achieve higher levels is in fact we're not -- are not working with the live virus, we're not living with some of the limitations that a live virus system would have and by being able to build these proteins and have them self-assemble in the particles, we don't have some of the inherent issues that you have working with live materials, live viruses.

And is there anything from a process standpoint that differs in terms of versus egg batches, for example, few hours, days, weeks into the process, is there a period with eggs where it looks like the batch is good and then it dies off or you just don't get the yields you had hoped for that make it difficult to forecast where perhaps on the VLPs you don't have that issue?

I would say that we've seen consistent yield between strains within our seasonal program and so that's an area where an egg based production you get wide variations and therefore where some of their unpredictability comes. The length of time it takes to get a productive seed in eggs for multiple passages in order to make the virus more productive take, obviously, reduces your ability to produce quickly and get those first doses out. So we've mentioned a number of times previously that with this (inaudible) approach we can release product within 12 weeks which is about half the time of what's expected from an egg based process. I think the other significant issue in there is that as these viruses are mutating to growing eggs in higher levels they're also changing their HA structure and therefore the vaccine as eventually made may not be as protective as the native sequences that we can produce in the approach. Again we expect to have a product that and we'll be testing this clinically that is more effective at neutralizing the viruses than the -- those that have been mutated through the egg passaging process.

Just one last question. With the process improvements that you've seen and the yield enhancements, does anybody want to take a shot at what impact that has on cogs? I know we're not at commercial scale but just kind of curious.

We strongly believe we'll be -- have cogs favorable to current egg base production.

Okay. Thank you.

At this time I'm showing no further questions.

Okay. Well, I want to thank all of you who took the time to come on the call and we look forward to giving you further updates. Thanks all and have a great day. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.