Novavax Inc (NVAX) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Novavax 2009 First Quarter Result Conference Call.

My name is [Delaine] and I will be your coordinator for today.

(Operators Instructions) Novavax, please proceed with your call.

On today's call will be Novavax's Chairman of the Board, John Lambert; President and CEO, Dr.

Rahul Singhvi; Chief Medical Officer, Penny Heaton and Interim Principal Accounting Officer, Evy Kopsidas.

Statements herein relating to a future financial or business performance, conditions or strategies and other financial 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 pre-clinical or clinical trials; the scope, rate and progress of its pre-clinical trials and other research and development activities; the scope, rate and progress of any clinical trials we commence; clinical trials results.

Even if the data from pre-clinical or clinical trials is positive, the products may not prove to be safe and efficacious.

Novavax's pilot plant facility is subject to extensive validation and FDA inspections, which may results in delays and increase its costs.

Dependence on efforts of other third parties, risks that the Company may not be able to secure a buyer for its most strategic assets or that the Company will be able to negotiate a profitable sale with such a buyer, dependence on intellectual property, competition for clinical resources and patient enrollments into our candidates in development by other companies with greater resource availability and risks that we may lack the financial resources and access to capital to fund our operations.

Further information the factors and risks that could affect Novavax's business, financial conditions and results of operations is contained in Novavax's filings with the US Securities and Exchange Commission, which are available at www.sec.gov.

These forward-looking statements speak only as of the date of this earnings call and Novavax assumes no duty to update forward-looking statements.

Mr.

Lambert, please proceed with your call.

Thank you and good morning.

As all of you know the recent outbreak of the swine origin H1N1 strain of influenza has raised global awareness of the threat from the disease and the need for new vaccines to prevent or reduce the impact of a possible pandemic.

The emergence of this strain of influenza has once again demonstrated a need for government and pharmaceutical companies to be able to respond quickly to flu pandemics.

I believe our virus-like-particle vaccine technology has the potential to provide the most effective and rapid vaccine response to this type of outbreak, and this is exactly the kind of public health challenge for which Novavax has been preparing and to which our team has been dedicated.

My confidence in our ability to serve in this crisis is based on the great progress Novavax has made during the past three years to develop vaccines for both pandemic and seasonal influenza.

Our technology has now advanced to the point where we can develop VLP based vaccines against a number of viruses, including the H1N1 virus.

For a company which has been in this business for less than four years, that's an impressive achievement and very important opportunity.

I'll turn the call over to Rahul now to discuss our recent progress in more detail with comments on our plans for the balance of the year.

Thank you, John.

And just to continue and add to what John was saying, we are applying all our expertise, knowledge and technology to create a VLP vaccine candidate against the 2009 H1N1 influenza strain, which originated in Mexico and the US, and has now spread in many parts of the world, taking 30 lives.

The timing of our efforts is fortunate with our manufacturing facility now operational, the establishment of partnerships with GE Healthcare and Cadila Pharmaceuticals and the recent publication of pre-clinical findings of a broad-based cross protection that our investigational H1N1 1918 VLP vaccine has shown.

This vaccine upon inter-nasal administration demonstrated that it would protect ferrets against not only the homologous 1918 H1N1 Spanish flu virus, but also a contemporary H5N1 Avian flu strain.

Today we are in a position to serve and participate in international plans and counter-measures to address the swine flu crisis.

We have begun the work on created a VLP vaccine candidate against the 2009 H1N1 swine flu virus and expect to complete production of the first batch of the vaccine within 12 weeks of receiving the genetic sequences.

This faster cycle time from strain identification to first vaccine batch would be another demonstration of our ability to create strain-specific vaccines to potential pandemic viruses.

Over the past few years we have gone through the process of creating recombinant VLP vaccine candidates for multiple strains of influenza, both seasonal as well as avian origin.

This experience and knowledge has prepared us to execute this real-life challenge.

In addition to the rapid response, our portable production technology for manufacturing VLP vaccine is well suited for installation of production capacity in international locations and this again uniquely positions us to support the needs of those countries that might desire a vaccine solution within their own borders, and of course, we remain ready, willing and able to serve the US government in any way we can.

The support of our partners GE and Cadila continues to be fantastic.

GE has provided production materials and equipment to support our efforts in general and in particular to produce a prototype H1N1 vaccine.

Cadila has opened its vast pharmaceutical infrastructure in India to significantly expand the breadth and depth of our own efforts and improve our odds of success.

Health agencies of the US government are aware of the need for recombinant vaccine technology like ours.

And we expect the Biomedical Agency for Advanced Research and Development, or BARDA, to issue a request for proposals shortly for development of recombinant flu vaccines to be funded by the US government.

We have committed to respond to such RFPs as soon as they become available.

The recent market conditions have also allowed us to retire a majority of our outstanding convertible debt on favorable terms.

Debt retirement also reduces our interest expense and removes a significant financial overhang from the Company.

As we disclosed in our press release this morning, in addition to retiring the majority of our convertible debt, we have increased our liquidity substantially.

We raised $11 million from the Cadila transaction and have raised an additional $7.5 million since then.

This capital raise has provided us with enough capital to execute our business plan for at least another year.

As a result, our balance sheet is now much stronger than what is reflected in our first quarter 2009 financial results, which Evy will review for you in a moment.

In addition to all this activity, we remain committed and continue to execute our product development plan.

We are making excellent progress in the development of a trivalent VLP vaccine candidate against seasonal flu.

We announced this week the launch of our second Phase II seasonal flu vaccine study to support dose selection for Phase III.

This trial will also give us important information for choosing the ideal dose for a study in the older adult population for this vaccine later this year.

I'll now turn the call over to our Chief Medical Officer, Dr.

Penny Heaton, to describe our Phase II seasonal flu program in more detail.

Thank you, Rahul, and good morning, everyone.

As Rahul indicated, we were delighted to begin enrollment earlier this week in the second study of our VLP vaccine candidate against seasonal influenza.

This study, which is being conducted here in the United States, has been designed to evaluate the safety and immunogenicity of a broader range of doses than we evaluated in the first study of our seasonal influenza vaccine.

This is a randomized, blinded study that will enroll approximately 220 subjects, who will receive a single injection of either a placebo or 50 micrograms or 60 micrograms per strain of our trivalent seasonal vaccine.

And please recall that the vaccine contains targets against three influenza strains, the H3N2, H1N1 and B strains that were circulating in the 2008-2009 influenza season.

This first set of results for this study will be focused on safety, including all adverse events and immunogenicity with respect to hemagglutination inhibition responses, or HIA responses, which have been shown to correspond with the protection against influenza illness in previous trials of other vaccines.

Other immunogenicity measures that we will be evaluating include antineurominidase activity and cell mediated immune responses, which may also be important for protection.

Recall that the influenza VLPs have been design to contain three key proteins that are important for immunity -- the hemagglutinin, or HA protein; the neurominidase, or NA protein -- and both of those stimulate the body to produce the antibodies that neutralize the influenza virus and prevent it from spreading down the respiratory tract.

And the third protein is the matrix 1, or M1 protein, which stimulates immune cells called cytotoxic T-lymphocytes, or CTLs, whose job it is to kill cells in the body that are already infected with influenza.

This three-pronged approach will hopefully translate into superior protection of our vaccine against influenza.

We anticipate that these primary safety and immunogenicity results will be available in the third quarter of this year.

Our goal is to use these data to help us with selecting doses for the next study of our seasonal influenza vaccine to take place this fall in older adults and for a Phase III efficacy study that we're planning for next year.

We are thrilled to have achieved this very important milestone in the development of our seasonal influenza vaccine.

As Rahul also indicated, we are developing VLPs against the newly emerged 2009 H1N1 virus and preclinical studies of our RSV and VZV candidates continue.

Please stay tuned for further updates on these programs next quarter.

Finally, we just returned from a visit to our new JV partner in India, Cadila Pharmaceuticals.

We are delighted with this new partnership and we know that they have many capabilities and resources that can really help us accelerate our development programs for our VLP vaccines in a cost effective manner.

Now I would like to the call over to Evy Kopsidas.

Thank you, Penny.

I would like to give a brief synopsis of our first quarter financial results, which were announced in this morning's press release and will be fully discussed in our form 10-Q, which will be filed by close of business on Monday, May 11, 2009.

We closed the first quarter with total cash, cash equivalents and short-term investments of $25.6 million compared to $33.9 million at the end of 2008.

This decrease of $8.3 million is related to cash spend of $7.4 million during the quarter, primarily for the continued development of our vaccine pre-clinical and clinical program, and the additional impairment to our auction rate securities of $0.9 million.

Our cash and short-term investment balance at March 31, 2009 is being reported net of $2.1 million in cumulative impairment charges reported for our auction rate securities, due primarily to their continued illiquidity.

Subsequent to March 31, the Company received the proceeds from the Cadila transaction of $11.0 million and approximately an additional $7.5 million from the sales of stock under our after market agreement.

With a portion of these proceeds, we retired $17 million of our $22 million in convertible debt by paying $12.1 million for principal and accrued interest in advance of the July maturity date.

Based on our cash and short-term investments as of March 31, 2009, the additional proceeds net of the cash used for the early extinguishment of the convertible notes and our intention to pay 50% of the remaining $5 million balance of our convertible notes with common stock upon maturity, we believe we have sufficient cash to fund our planned operations for at least the next 12 months.

We are planning to raise additional capital in the future through public or private equity and or debt financing in order to pursue our business plans beyond the first quarter of 2010.

At this point in time, we have not obtained any further financing.

Now I'd like to turn to the opertional results.

Revenue for the first quarter ended March 31, 2009, was a modest $21,000 compared to $0.5 million for the same period in 2008, a net decrease of $0.4 million due the completion of a governement contract in the first quarter of 2009.

Our research and development costs for the first quarter of 2009 were $4.3 million compared to $4.4 million in the first quarter of 2008.

This modest decrease was due to several factors including a $0.2 million decrease in employee costs, a $0.1 million decrease associated with the closing of our Taft Court facility in October 2008, when we then consolidated our operations into our Belward Campus facility.

These decreases were partially offset by a slight increase of $0.1 million in our outside testing costs associated again with our continuing clinical and pre-clinical trials and testing, process development, ongoing manufacturing and quality related programs, and a modest $0.1 million increase in our facility costs related to the research and development function.

Our general and administrative costs were $2.9 million in the first quarter compared to $3.2 million in the prior year.

The decrease was due to a decrease in employee costs of $0.1 million, a decrease in facility costs associated with general and administrative functions of $0.1 million, and a decrease in charges to the allowance previously established for two notes receivable from two of our former directors of $0.2 million.

In 2008, we concluded that these notes should be better classified as a reduction of equity and, consequently, we have not recorded any further reserve charges.

These decreases were offset by a modest increase of $0.1 million in professional fees associated with the preparation of the Company's various SEC filings.

Our net interest and other expense was $1.2 million for the first quarter of 2009 compared to net interest in other income of $0.1 million for the first quarter of 2008.

The decrease in net interest and other income resulted from the additional impairment of $0.9 million in our auction rate securities and a decrease in the interest income of $0.4 million resulting from a decrease in the cash and short term investment balance during the quarter.

As a result of these changes in income and expenses, we are reporting an increase in our net loss for the first quarter to $8.3 million or $0.12 per share compared to $7.8 million or $0.13 per share for the first quarter of 2008.

The loss for the first quarter of 2008 includes a $0.7 million loss from discontinued operations.

I would like to remind everyone that we have reported all activities related to the prior production of Estrasorb as discontinued operations for the first quarter of 2008.

The financial results for all periods presented in both our press release and our form 10-Q have been reclassified to separately disclose the results of these discontinued operations.

As the Company completed its obligations related to the Graceway Agreements in 2008 as planned, there has been no further activity related to these discontinued operations.

Now I would like to turn it over to Rahul for his summary comments.

Thank you, Evy.

Before we open the call for questions, let me review what we have accomplished over just the past few weeks since we had the last call.

We've responded rapidly to the international outbreak of the novel H1N1 strain of influenza, which has now registered over 1,400 cases worldwide and taken over 30 lives.

The advances we have made in developing recombinant VLP vaccines for influenza over the past three years has positioned us well to create a vaccine fast and participate in serving the medical community and addressing this crisis.

In addition, we have dramatically improved our financial picture by retiring a majority of our convertible debt and raising capital to increase liquidity.

Our improved financial position enhances our ability not only to respond to crisis like this H1N1 flu -- swine flu crisis, but to continue to aggressively execute our business plan.

And we've just demonstrated that by starting our second Phase II clinical trials for our seasonal flu vaccine candidate.

We look forward to providing you further updates in the coming quarters.

And I am now happy to open the call for questions.

Thank you, sir.

(Operator Instructions) Please stand by for your first question.

Our first question comes from Brian Abrahams, your question, sir.

Hi, thanks very much for taking my question and congratulations on the clinical progress and on strengthening the balance sheet.

A question on pandemic and then a couple on seasonal, can you give us a better sense of your plans for clinical testing of the H1N1 swine vaccine once you're able to produce this a few months from now?

Yes, this is Penny.

Thanks very much.

So we are anticipating that we will have the VLP vaccines that will be available in a little bit less that 12 weeks now; 12 weeks from the time that we receive the genetic sequences.

And we're actually currently working with several government and non-government agencies both here in the US and abroad and discussing the path forward for clinical testing.

As you can know this is a very dynamic situation and we're trying to just be as responsive as we can and be ready to help in any way that we can.

But we are in discussions with several agencies on how we might move forward with that.

Okay, fair enough.

And then for the Phase II seasonal study that you just initiated, can you give us a sense of what your goals are for the zero protection levels, given that in this study you're using the more recent strains than in the prior Phase II?

Sure.

Yes, this study was specifically powered to -- had 80% power to demonstrate the zero protection criteria that are provided in the FDA guidelines for licensure of seasonal flu vaccines.

So our goal is to reach those zero protection levels or better.

Okay.

And then lastly, for the Phase III study, are you -- can you give a sense of the timeline there?

Is that something we should expect would likely begin in the 2010-2011 flu season?

And do you have a sense yet if that's going to initially be in healthy adults or if elderly is going the first population you look at?

Yes, so we are making plans for our clinical studies next year and obviously any efficacy trial would be started before the influenza season.

So that then we can get everybody vaccinated and follow them throughout the season for evidence of disease.

And for efficacy studies, those are typically done in healthy adults because you can use a placebo control, and so the sample size is manageable so that you can truly evaluate that the true efficacy of the disease, and not just efficacy relative to another vaccine.

So that is the tentative plans for now.

Okay and then just real quick, and then I'll hop back in the queue.

The elderly study, do you have a sense of what the comparator arm would be?

Is that going to be placebo controlled?

Would that also include an active control?

That would include an active comparator.

Great.

Well, thanks very much for the added information.

Thank you.

Thank you.

Our next question comes from Borris Peaker; your question please.

Yes, hi, how are you.

Just a quick question on -- you know recently the HHS made a request for information from companies that may assist them in this whole H1N1 flu outbreak and they have this technology readiness level which they basically want products at level 7 and up.

I was just wondering if you could comment whether or not your vaccine will fit into that category from the perspective of human Phase II data, animal GNP manufacturing, processes and quality controls, things like that.

We certainly believe that our development to date fits that criteria, but we remain -- we are in discussions with the government and until further updates, it's hard to really make a prediction as to how that relationship is going to go with development.

But have they responded and given you some kind of a sense, yes, at least you qualify or no you do not?

What's the typical interaction in this process?

We just really cannot comment on that right now.

Okay, okay.

And also just wanted to get a sense of longer term-- if the government decides to elect you guys to manufacture some vaccines, how would that impact on the timelines that we just discussed?

Or that you guys just presented?

Again it's going to be a very dynamic situation, and once we have a little better idea of what we need to do, we'll then come back and update you on the timeline.

Okay.

Alright, well, thank you very much.

Thank you, Borris.

Thank you.

Our next question comes from [Marvin Gruber].

Your question, sir.

Yes.

First, I'd like to register a complaint.

I checked - I called your Investor Relations department a couple of times before the swine flu thing broke.

I had questions and never received a call back.

Then I called your CFO and I never received --

Ladies and gentlemen, if you have a question at this time, please press the one key.

Okay, so if there are no further questions, again thank you for your support and we look forward to speaking with you again in a few months.

Thank you for your participation in today's conference.

This concludes the presentation you may now disconnect.

Good day.