Novavax Inc (NVAX) 2009 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Novavax 2009 third-quarter results conference call.

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

(Operator Instructions).

Novavax, please proceed with your call.

Good morning and thank you for joining Novavax for today's 2009 third-quarter conference call.

On today's call are Novavax' President and CEO, Dr.

Rahul Singhvi, our Chief Financial Officer, Fred Driscoll, and other members of our senior management team.

Before we begin our prepared remarks, I would like to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections.

Statements that are not historical facts are forward-looking and are inherently subject to risks and uncertainties.

For a discussion of these risks and uncertainties we refer you to our 10-K for the year ended December 31, 2008, as well as to our 10-Q for the third quarter of 2009.

Now I will turn the call over to Dr.

Rahul Singhvi.

Thank you, Tricia, and good morning everyone.

This is a very exciting time for Novavax.

And I am pleased to give you an update on our progress during the last quarter.

With the start of clinical studies with our 2009 pandemic H1N1 flu vaccine in Mexico last month in collaboration with Avimex Laboratories, we are moving rapidly to develop a novel vaccine solution to this critical public health problem.

Enrollment in this trial has been proceeding rapidly and we expect to have the first phase of testing completed shortly.

As a reminder, this two-stage study is designed with a large enough sample size and the appropriate endpoints to support potential approval of this vaccine in Mexico.

It is the largest clinical trial in our history and will be an important test of the safety, immunogenicity and efficacy of our VLP vaccine against H1N1 influenza.

Earlier this week I was asked whether we are allowed to use an unapproved vaccine in the United States for a clinical trial in Mexico, given certain FDA restrictions on the export of investigational agents.

Let me explain briefly why this is not an issue for us.

Under the FDA export Reform and Enhancement Act of 1996, which governs the export of an unapproved drug, we are allowed to ship drugs to Mexico without prior FDA approval upon certification of certain conditions pertaining to the intended use, packaging, labeling and safety of our vaccine, all of which we have met.

We have provided the necessary certifications to the FDA to ship our vaccine to Mexico for clinical use.

And that is all that is required for us regarding this issue.

If the product eventually gets approved in Mexico by the Mexican regulatory authorities, there are several mechanisms in this act which will allow us to export the product to Mexico.

So let me be absolutely clear on this point, there is no restriction on the export of our vaccine to Mexico for use in our clinical trial or for sale.

This is an important study for us, and its findings may also be used to support approvals in other countries for both our H1N1 flu vaccine and our trivalent seasonal vaccine.

Last Saturday we presented positive Phase 2 results with our trivalent seasonal flu vaccine at the Infectious Disease Society of America, or IDSA meeting.

These results showed that our vaccine was well tolerated and induced robust immune responses against all three influenza strains in the vaccine.

These results will support our seasonal flu study in older adults later this quarter, and should allow us to advance our seasonal flu vaccine into Phase 3 studies next year.

Let me make a quick comment on our partners.

The establishment of regional partnerships and manufacturing capacity has been the cornerstone of our business development strategies and is already paying dividends.

Our partnership with Cadila Pharmaceuticals in India is already paying off.

As you know, we have a joint venture company with Cadila Pharmaceuticals called CPL Biologicals.

CPL Biologicals recently broke ground on a new VLP flu vaccine production facility.

This state-of-the-art 25,000 square foot facility will open in February 2010, and when fully operational it will be capable of producing over 60 million doses of VLP-based flu vaccines annually.

In Spain our collaboration with ROVI Pharmaceutical is still in negotiations regarding technology licenses and related commercial agreements.

We are hopeful that these negotiations will be completed quickly and allow us to proceed with the development of our technology for prevention of H1N1 and seasonal flu vaccines in Spain and other parts of Europe.

This partnership will provide us the funding to conduct Phase 3 clinical trials for both our seasonal and pandemic VLP flu vaccines and enable marketing authorization in the European Union.

In addition to these regional partnerships, our collaborations with GE Healthcare and Xcellerex are proving to be critical for our manufacturing strategies.

GE Healthcare is supporting our H1N1 trial in Mexico by providing a single use bioprocessing technology for vaccine production, while Xcellerex is contributing its flex factory production technology to accelerate the development of our manufacturing process and expand our production capacity.

We have made great progress with our RSV vaccine program as well, where we received a Small Business Innovation and Research grant from the National Institute of Allergy and Infectious Diseases to support our preclinical research activities.

RSV is the most common cause of lower respiratory tract in infants and children, and also affects more than 8.5 million adults annually.

We recently selected for development a recombinant particle-based RSV vaccine candidate, which targets the fusion, or F protein, on the surface of this virus.

This candidate vaccine has already shown that it can protect mice against RSV infections, and further preclinical studies are ongoing.

All of these achievements are accomplished on budget, and with a backing of a much healthier balance sheet now that we have retired all our outstanding convertible debt.

I wish to express my gratitude to our employees and our shareholders for making all this possible.

In summary, we are working diligently to advance our late-stage, mid-stage and preclinical development programs, and our team is making great progress in all of them.

Our partnerships in Mexico, Spain, India and the United States are accelerating the development and commercialization of our pandemic and seasonal flu vaccines faster than we could achieve on our own.

Looking ahead, we plan to begin our trivalent seasonal flu studies in elderly this quarter, complete our H1N1 clinical trial in Mexico early next year, complete our vaccine production facility in India later in 2010, advance our RSV candidate towards an IND defiling in the first half of next year, and continue to pursue international partnerships and manufacturing technology improvements.

Before I turn the call over to Fred, I would like to thank our two retiring Board members, Jim Tannenbaum and Tom Monath for their years of service to Novavax' Board of Directors.

Both Jim and Tom have brought many value insights and useful perspectives to the Board's deliberations as Novavax has evolved and grown.

We greatly appreciate their contributions to the Company's success, and wish them well in the future.

I will now turn the call over to Fred Driscoll to review our third-quarter financial results.

Our net loss for the third quarter of 2009 was $7.5 million or $0.08 per share compared with a net loss of $7.8 million or $0.12 per share for the same period last year.

For the nine months ended September 30, 2009 our net loss was $24.4 million or $0.30 per share compared to a net loss of $25.0 million or $0.40 per share for the comparable period in 2008.

At the end of September Novavax had cash, cash equivalents and marketable securities of $34.4 million, compared with approximately $33.9 million at the end of 2008.

As Rahul just mentioned, the Company has a far stronger balance sheet than it did at the beginning of this year.

Our cash burn rate has been fairly steady over the past three quarters, which reflects the cost containment initiatives that were implemented earlier this year, offset partially by the clinical trials that have been conducted in the seasonal influenza area.

With that, I would like to now turn the call back over to Rahul.

I think we are in a very strong position to continue our preclinical and Phase 2 programs in influenza and RSV, thanks to our prudent use of cash, our much stronger balance sheet, and the financial support of our partners in the US, Mexico and India.

We have ambitious agenda ahead of us, but I believe we have the resources and talent to execute our program successfully.

This concludes our prepared remarks.

Now I would like to turn it over to the operator to open the call for your questions.

(Operator Instructions).

Brian Abrams, Oppenheimer.

This is actually [Jay Taylor] calling in for Brian.

I just actually wanted to get a sense of how broadly applicable the trial being conducted in Mexico is.

Like in particular, have you been in discussions with regulators outside of Mexico as to how they will accept that data for a path going forward outside of Mexico?

It is very broadly applicable for a couple of reasons.

One is that this trial could give us efficacy data, and that efficacy data is very valuable and could be applicable not only for H1N1, but also for seasonal flu trials -- our seasonal flu vaccine.

In terms of other regulatory agencies, yes, we are in discussions with other regulatory agencies, and we have discussed the trial that we are conducting in Mexico.

It is too early for us to comment on how we will be able to use these data, but certainly those discussions are ongoing.

Great.

Thanks a lot.

Ed Nash, Merriman Curhan Ford.

Thanks for taking my call and congratulations on all the accomplishments that have gone on this quarter.

I just had a quick question actually about the poster that was presented at IDSA on the trivalent vaccine.

I just wanted to see if maybe, Rahul, if you could comment a little bit on -- here it was showing that the seroconversion rate was not met for the FDA standards for H1N1.

And probably it doesn't like the seroprotection either.

I just wanted to know about going forward how that can be adjusted or dealt with in as far as formulating this vaccine so that you could get these seroconversion rates up in a trivalent vaccine for H1N1.

Let me -- if you don't mind -- first of all, thank you for that question.

The seroconversion rate was in fact met for both 15 and this 60 micrograms, because if you can look at the lower 95% confidence bound on both those doses, and you'll see that the number were greater than 40%, which is what you need to pass the seroconversion criteria.

But I do agree with you that the seroprotection rate was not met.

Now we have to look at it in context of how these vaccines, and in these guidance documents, are written.

The FDA has provided a guidance that these three seroconversion rates and the three seroprotection rates should be met, but there are no -- there is no -- it's not like a contract that you have to have all six of them met for licensure of the vaccine.

In fact, if you look at the label of Sanofi, Novartis, GSK, othere companies' vaccines, you'll find that in a number of years these vaccines do not satisfy these criteria.

So this is an accepted fact that in certain years certain strains will not satisfy the seroconversion, seroprotection criteria.

So it ultimately goes back to the overall data package, not just the one trial.

So I just want to let you know that just missing one out of six doesn't mean it is a problem.

You will see that in the label of other vaccines that people miss two, three or four of those criteria some years.

Okay, that is actually very helpful.

So is there anything that we can right now compare for this case, looking at this trivalent vaccine and this data that you presented, is there anything that we could just looking at these seroprotection rates, is there anything that we can use to compare apples-to-apples where we have seen someone out there working on another trivalent that's got H1N1 in there?

Well, you can look at the Fluzone component in this trial itself.

And while the data set is very small, you'll see that the Fluzone component actually missed five out of six of those criteria.

Got it.

Thank you very much.

George Zavoico, Westport Capital.

Congratulations on a very nice quarter and all your accomplishments as well.

A couple of questions.

In the second quarter you didn't have any royalty milestones or licensing revenue.

This quarter you recorded about $166,000.

Is that going to be recurring?

Is that a one-off event for this quarter, and is a royalty milestone or a licensing fee?

Those are government grants that we engage in time to time.

That is primarily what that is made up of.

Is that the SBIR?

No, that is not the SBIR at this point.

But that is -- it is a makeup of contracts that we have done in the past for SARS and HIV in particular.

Do you expect that to be recurring then?

From time to time we will have ongoing government relationships and government contracts, so I would say, yes, we will continue to have those, as we just saw, as you mentioned earlier, with the SBIR grant.

But that is something that we are certainly looking forward to.

As we have said in our public documents, we have submitted our RFP to the government on the BARDA request for advanced recombinant vaccine development.

So that is something that is coming first quarter of next year.

When do you expect the SBIR grant -- what is the start date for the SBIR grant?

It has already started; it has just recently started.

Okay, so you are already -- the government is already giving you cash?

That's correct.

What do you expect the capacity of the Xcellerex program to be?

How many doses do you expect and how many do you project that Mexico might need?

It is a great question, George, and I wish I could answer that, but I will not.

You'll have to wait for some more time before we can get to that one.

With regard to the facility in India, the 60 million doses that you think -- or that Padilla will -- or CSL will be manufacturing, is that directed for the Indian market exclusively, or is any of that going to be available for export?

Absolutely, it will be available for export.

That facility is going to be built according to the US and European standards, and should have all the criteria met for the product that is produced there to be sold anywhere in the world.

As you know, CPL Biologicals is only allowed to, or has the rights, to sell product only within the territory of India.

Any excess capacity that we have can -- we can contract with CPL Biologicals through a supply agreement and sell in territories where we own commercial rights.

Given India's population, is 60 million doses going to be enough to even meet the market demand in India?

It is a huge country and there are a lot of people there, but the influenza market is very, very -- it's really in its embryonic stage right now.

It certainly is going to get -- it is getting a huge boost because of the awareness that is created by the pandemic.

But it is at the moment a very small market.

It is expected to grow very, very explosively.

So 60 million is likely over time not going to be enough, but our expectation is that CPL is going to continue to expand that capacity as the demand grows over there.

You mentioned GE Healthcare helping out on the -- in the Mexico trial.

Is that -- are they supplying the liners and the other components on their penny, or is the Mexican government paying them or are you paying them?

They are supplying it to us on their penny.

That's great.

Finally, a question about finish and fill.

Are these facilities -- is Xcellerex doing finish or fill?

Do you have to contract with someone else?

With potentially the vaccine being sold or available for export within the next several months, really maybe before the end of the first half of next year, what provisions do you have in place to actually be able to finish and fill the vaccine and provide it to the distributors?

We have contracted with somebody else to do the fill and finish, and they will be ready to go as soon as the bulk is ready.

Excellent.

Thank you very much.

Boris Peaker, Rodman & Renshaw.

Congratulations on all the progress in the quarter.

I just have a couple of -- my questions have been answered already -- so I just have a couple of follow-ups in terms of financial.

How many shares did you, or if any, did you sell this quarter through the equity line?

What was the share count at the end of the quarter, and I guess how many shares are still available under the equity facility?

Let's take the first question.

We sold in the quarter about $8 million worth.

We have drawn down off of the total ATM about $22 million of the original line that we had.

As you saw an announcement we made earlier -- sorry, in September -- we also added to that ATM, which we have not drawn down anything off of, and that was for $10 million.

So that is the situation on that.

As far as the share count, as was in our earnings release today, a total basic and diluted weighted share average of around 92 million shares.

No, I just meant the actual ending quarter shares at the end of the quarter share count, not average.

The total average -- sorry, the total count was approximately, I believe, about 98 million.

Thank you very much.

There are no further questions in the queue at this time.

I would like to turn the program back to management.

Thank you.

So again this has been an extraordinarily productive time for us and I'm confident that we are creating value for all our shareholders and our other stakeholders.

And I look forward to our next update, and appreciate your time today.

Thank you all.

Thank you, ladies and gentlemen, for your participation in today's conference.

This does conclude the program.

You may now disconnect.

Good day.