Novavax Inc (NVAX) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Novavax 2010 first quarter conference call.

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

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

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

(Operator Instructions).

As a reminder this program is being recorded.

Novavax, please proceed with your call.

Good morning.

And thank you for joining us on today's first quarter 2010 conference call.

Both the earnings call -- the earnings release from this morning and an archive of this earnings call can be found on the company's website at www.novavax.com.

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

Rahul Singhvi and members of our executive 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 herein relating to future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding revenues, operating expenses, use of cash, and clinical developments and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Novavax's cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties which can change over time.

Further information on the factors and risks that could affect Novavax's business, financial conditions, and results of operations are 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 call and Novavax assumes no duty to update such statements.

I will now turn the call over to Dr.

Rahul Singhvi.

Thanks, and good morning, everyone.

During the first quarter, we made significant progress on several fronts, and as a result are on track to reach several major milestones this year.

First, our H1N1 flu vaccine study in Mexico has been completely enrolled and the results to date have been quite encouraging.

In March, we reported positive results from the first stage of this two-stage study, which showed that our vaccine was well tolerated and induced strong immune responses in healthy volunteers between the ages of 18 to 64 years.

The larger second phase of the study has completed enrollment of approximately 3500 subjects to confirm safety of the vaccine, and a final readout of the safety data will occur later this year.

To date, no vaccine-related serious adverse events have been reported in this large study.

As you know, based on these data, we along with our partners Avimex have submitted a product registration application to the Mexican health officials which is now under review.

In addition to our progress with our H1N1 vaccine, we recently reported positive results from our trivalent seasonal flu vaccine studies in both healthy and older adults.

I won't review all of the findings here since we would like to present them at upcoming scientific meetings and we've already described topline results previously, but the key points are that we have seen robust immune responses against all three influenza strains contained in the vaccine which are the H1N1, H3N2, and B influenza.

And we have also seen enhanced neuraminidase inhibition compared to the inactivated trivalent influenza vaccine or TIV.

We believe our VLP vaccine has the potential to produce a broad based immune response.

The data from these clinical studies are encouraging and suggest that our trivalent influenza vaccine may be effective in a broad range of subjects.

These data are also useful for planning further clinical testing of our trivalent VLP vaccine.

As you know, we recently reported that BARDA has determined that our response to their RFP for the advanced development of recombinant vaccines for seasonal and pandemic influenza is in the competitive range for award of a development contract.

We are not in a position to comment further on our proposal or ongoing discussions with BARDA at this time because of their highly confidential nature, but we are obviously very pleased with the significant development for the company.

In the meantime, we are making excellent progress with preparations to pursue clinical testing of our vaccine to prevent Respiratory Syncytial Virus or RSV.

This is a very important opportunity for us to help prevent the leading cause of serious respiratory disease in infants and young children worldwide.

Bronchiolitis and pneumonia occurs in 25% to 40% of RSV-infected infants.

RSV is also increasingly recognized as a significant pathogen in the elderly population.

Published reports indicate that in the US, Western Europe, and Japan, close to 1 million people are hospitalized annually due to RSV.

Despite the incidence and severity of these infections, there is no RSV vaccine currently available, and this represents an enormous unmet medical need.

We recently reported very encouraging preclinical results in animals and successful scaleup of our manufacturing process to support toxicology studies.

We will have results of our toxicology study shortly, and are already scheduled to meet with the FDA soon to discuss our IND application.

If all goes well, we could begin Phase 1 testing of our RSV vaccine during the second half of this year.

I'm particularly excited about this program because it demonstrates the potential of our recombinant VLP platform technology to create vaccines to address a variety of infectious diseases, not just influenza.

We will say more about the Phase I RSV study on our next call.

In addition to our clinical progress during the first quarter, we were pleased to announce the appointment of Dr.

James Young to our board.

Previously, Jim was president of R&D and MedImmune and was instrumental in the development of FluMist and Synagis.

He brings valuable experience in vaccine development, and will be a great guide as we move forward in our pipeline.

Our joint venture in India, CPL Biologicals, continues to make progress on all fronts.

Of particular note, the world class vaccine manufacturing facility is expected to complete construction this month and should become operational during this summer.

In summary, we are making good progress in each of our vaccine programs, generating encouraging clinical data from our trials, expanding our therapeutic reach into untreated infectious diseases, and validating the potential of our technology to create safe and effective vaccines.

Let me now turn the call over to Fred, who will review the financial results from the first quarter.

Thanks, Rahul.

For the first quarter of 2010, we reported a net loss of $11.4 million or $0.11 per share as compared to a net loss of $8.3 million or $0.12 per share for the first quarter of 2009.

The primary reason for the increased loss for the first quarter of 2010 as compared to the same period in 2009 was higher research and development spending to support the company's clinical trials related to its H1N1 and seasonal influenza vaccine candidates.

Research and development expenses for the first quarter of 2010 increased by $4.7 million to $9.0 million as compared to $4.3 million in the same period in 2009.

General and administrative expenses for the first quarter of 2010 decreased by $0.4 million to $2.5 million as compared to $2.9 million in the same period in 2009.

As of March 31, 2010, the company had $32.9 million in cash, cash equivalents and short-term investments compared to $43 million as of December 31, 2009.

Based upon our current operating plans we have enough cash to last us into early 2011.

That concludes our prepared remarks and now operator we will now open the lines for calls, please.

(Operator Instructions).

Our first question comes from George Zavoico from -- just one moment.

McNicoll Lewis.

Hi Rahul, Hi Fred.

That is McNicoll Lewis and Vlak, or MLV.

Hi George.

Congratulations on a good quarter.

Quick question regarding the Mexican market as it is right now compared to what it was several quarters ago -- and your -- if any supply agreement with Avimex and the Mexican government.

Some countries now have an oversupply of the H1N1 pandemic flu vaccine and practically are at least speaking about either selling it or practically giving it away.

How do you see this impacting the market in Mexico and your plans and relationships with both Avimex and Xcellerex?

I agree with you that there has been an oversupply of H1N1 and that can affect our chances of getting sales in Mexico but we continue to pursue setting registration in Mexico because that in and of itself is a major accomplishment for this company.

It will also help the company in pursuing a seasonal trivalent vaccine approval in Mexico because getting the H1N1 approved will certainly support the approval of the trivalent vaccine as well.

And that has a more sustainable market in Mexico.

So that remains to be our strategy in Mexico.

With regard to our relationship with Avimex, it is very strong.

Avimex is continuing to work very hard to make the product approved to get the product registered in Mexico.

They are doing all the ground work.

We have terminated our relationship with Xcellerex since we at the moment have no plans of selling any product in Mexico.

Okay.

And what about in India then, you say you are going to -- hello?

You say you are going to complete construction, congratulations on that.

What is the next step in India?

Are you going to commence trials there?

Yes, our plans in India are to commence trials.

We plan to produce product in India and go into clinic hopefully this year.

Our goal is to get the product approved both for H1N1 and as well as for the seasonal flu vaccine in the next several months [years].

If all goes according to -- if all goes well, then you might be able to market the trivalent seasonal flu in India for the, what, the 2011/2012 season?

I think our timelines are very much dependent on the regulatory agencies and approvals.

So it is hard for me to pinpoint an exact date, but we continue to make progress and we are going to go with as much vigor as possible in making this happen as quickly as possible.

But certainly it is hard for me to give you a date in terms of when it is going to get approved and when we will start marketing in India because there are too many things that are out of our control.

And finally, any update on the status of a new EU partnership to replace ROVI?

We are in discussions with a number of partners, and as these things become more baked, I guess we will come out and tell you more about what we are doing in Europe.

But we remain in discussions with a number of partners, potential partners.

Great.

And congratulations on the results that you announced in the last quarter.

Very nice.

Thanks, George.

Thank you very much.

Thanks, Rahul.

Okay.

Thank you.

Our next question comes from Ted Tenthoff from Piper Jaffray.

Your question, please?

Great, thank you very much.

So a lot of questions answered there.

Maybe following up on India -- rather than kind of saying what the timing looks like, can you walk us through what remains to be done over there to actually get licensure and then ultimately to develop the market in India?

Sure.

That is a great question.

Firstly, I think you have to conduct clinical trials and there are two types of trials you have to do.

One, you have to go through a trial that could be done with material that is imported from the US or produced in India and if it is done with material that is imported from the US, then you have to produce material in India in that facility that we talked about and then bridge that material with the material that is imported.

So there is a bridging aspect and certainly there is the testing of the vaccine in the Indian population and demonstrating that the result that we have seen in other populations like in Mexico and in the US are translated in the Indian gene pool.

So those are the two types of clinical trials that are required.

We remain in discussions with the drug controller general of India which is the regulatory authority in India so, you know, as things become more clear we will certainly let you all know.

But those type of trials are the ones that we will have to do.

And that is why the opening of our facility in India is very important because as we get this facility online, we can produce material from there, and that material can be used for doing the clinical trials that are necessary for getting the product approved in India.

Do you receive any milestones for them completing that facility or anything along those lines?

No, in fact, this is a very big strategic asset now for us because, you know, this facility which has been designed and built for international standards can be inspected if necessary by the FDA or the European authorities.

And we hope that it is going to pass with flying colors, and this facility can become strategically very important for us because now we have a manufacturing base that we can source material from by having some sort of a transfer price agreement with our joint venture.

Great.

Excellent.

That's very helpful.

I guess shifting gears to the US market.

What kind of pivotal study would you envision doing here to get licensure potentially for the 2011/2012 flu season?

Well, I think a lot of our development plans are now going to be dependent on our discussions with BARDA.

We hope that as our discussions continue with them and we end up getting the development contract these studies are going to be -- will have to be aligned with BARDA.

So that is one thing that is going to affect our development plans.

The second thing in terms of studies that are required independent of BARDA, are going to be basically signed off in the end of Phase II meeting.

So we will go there with a plan and in the end of Phase II meeting that is an official meeting with the FDA we get approval or get agreement on what kind of Phase III program is necessary for getting the product approved.

There are a number of factors that play in that plan.

At the moment we hope that we can get a Phase III program that is simply an immunogenicity and safety study, a non-inferiority study against a marketed vaccine, but again, that is going to have to be dependent on ultimately our agreement with the FDA.

Have you seen the new non-inferiority guidelines coming out of the FDA in terms of establishing basis for the parameters for non-inferiority?

Yes.

Okay, great.

We are quite familiar with that, yes.

Okay good.

And I guess one last question if I may, I don't mean to hog it up.

But looking at, you know, the BARDA contract coming in, when is the end of Phase II meeting?

And is there potential for delay if that contract doesn't come?

In other words, in a timely basis.

In other words, would you initiate clinical studies if necessary prior to receipt of a BARDA contract?

And how much does, you know, timing of getting that contract influence HHS?

I think it depends on when this BARDA contract discussions, how long they continue.

There is a particular -- there is a reasonable delay that we can take, but if it gets too protracted then certainly we have to get on our own and go through the end of Phase II meeting by ourselves.

Our preference would be that we do this in conjunction or in alignment with BARDA.

When is that end of Phase II meeting, did you mention that?

At the moment we are going to wait and see how our discussions with BARDA go, and once those discussions become more firm we will schedule that meeting.

But we are not going to schedule it until we have a clearer path from where we stand with BARDA.

Understood.

That's helpful.

Thank you.

Thanks, Ted.

Our next question comes from Edward Nash from Roth Capital.

Your question, please.

Good morning, guys.

Thanks for taking my question.

Hi.

I just wanted to get a sense -- I realize you are very limited on what you can say about the BARDA contract and I understand that.

And I would think it is probably most people's perception given the recent pandemic flu issues we've had first with avian and then the swine in the most recent years that the FDA would be wanting to move quickly on this.

And the BARDA contract obviously puts you in a whole different playing game as far as trying to negotiate with partners and really not having to -- I guess a much more relaxed position, if you will, because you would be having the government pay for the clinical trials.

But just curious, from where you've seen it, it seems [for me from the] timeline of the RFP to when you responded to that -- submitted your information to the time where you got narrowed down showing that you were in the competitive range seems to have been moving pretty quickly.

Are you finding that your conversations with the FDA -- sorry, with the DHHS are actually not only rotating but translating?

That they actually are progressing or do you, you know, where things could become maybe more imminent than not?

Just want to get a perception of what the, I guess the pressure the FDA is under to actually get something done and completed.

I found that the engagement has been quite enthusiastic and we hope that that will continue, and that that will lead to a very speedy resolution of the final steps in this process.

Do they have to -- is one of the steps do they have to come in and actually observe the facility?

Is that something that is always a requisite or not?

Absolutely, yes, that is part of the plan.

And in fact, they have already come in and have inspected the facility.

Okay.

And then my last question I guess it's basically kind of a twist to a previous question which was talking about partnerships in Europe to replace the other.

Just beyond Europe -- just other parts of the world, I mean are there negotiations ongoing in other areas for, you know, with governments or with, you know, companies to produce vaccine in other areas besides what we currently know about?

Again, we are always in discussions with multiple partners around the world and we are generally going around through a partnership route rather than going directly to governments.

But we remain in discussions with a number of partners in different parts of the world.

We are certainly very focused on India and Mexico at the moment because these things are much further along and we want to get the ball across the goal line in those areas.

Great, thanks Rahul.

Thanks, Ed.

Thank you.

Our next question comes from Bill Tanner from Lazard Capital.

Your question, please.

Thanks for taking the question.

A couple of questions for you, Rahul.

Just on the RSV program, at what point in time do you think you might have some proof of concept data?

Not necessarily perhaps in children, but just sort of understanding the immunogenicity in adults?

I think that the first trial that we conduct, which is not going to be in children because of obvious safety reasons, it is going to be likely in seropositive adults, and in that population we will certainly find out more about safety.

But because our guess is that the FDA is likely going to ask us to do that study in seropositives, we may or may not see proof of concept on the immunogenicity.

But the second cohort that we will go into will likely be seronegative adults, and that for sure will give us some idea of where we are on immunogencity and what kind of immune response we're gettting.

And so then realistically it might be, I don't know, more towards in the second half of 2011 do you think?

No, no, no, no.

I expect end of this year.

(multiple speakers)

Oh, okay.

And then you know, you mentioned and would be interested in where the data from the seasonal study might be, seasonal flu vaccine study might be presented.

But you also mentioned that you have seen some neuraminidase immune response and curious, one, where we might see more data and two, if you could maybe even sort of semi-qualitatively address the neuraminidase activity.

Right.

So we've already I think disclosed data from our healthy adult study on neuraminidase activity and we've shown that we are seeing very robust neuraminidase inhibition.

I guess I'm thinking more of the elderly.

In the elderly, so I think those data we expect probably in the next quarter.

Okay.

And also I want to mention in addition to the hemagglutinin inhibition antibody assays and the neuraminidase inhibition antibody assays, there is another assay which is very useful called microneutralization, which is essentially a virus neutralization assay, which has been developed and could be very useful in looking at [our] immune responses.

And that is another data point that we will hopefully be able to describe in the next quarter or so.

Fair so to say this assay has already been done.

Yes -- well these assays are ongoing.

Some of them have been done, some are still ongoing.

As it relates to the neuraminidase inhibition activity fair to characterize it as being quite different than a typical sub unit vaccine, I guess?

Yes.

Okay.

Thank you.

Thank you.

Thank you.

Our next question comes from Bud Leedom from Global Hunter Securities.

Your question, please.

Hi, good morning.

Hi, Bud, how are you?

Terrific.

Terrific.

Thank you.

Just a couple of maybe topline questions here.

Just curious, given that H1N1 is part of the 2010 trivalent, does that potentially change the dynamic in Mexico or provide any advantages to you given your trials there at this point?

Yes, I think it does because it is going to be part of the formulation for the seasonal.

Any data that we have generated on H1N1 can be used to support the files, whether they are in Mexico or anywhere in the world.

For example, we hope that this allows us to take all of the data that we have generated in Mexico and put as part of our dossier in the US filing should we want to do a trial with a seasonal flu vaccine in the future that contains the H1N1 California as one of strains.

So I think the fact that this virus remains to be part of the formulation of future vaccines allows us to take advantage of all of the data that we have generated in Mexico and used them even though the studies have not been done [in the US IND].

And certainly within Mexico it is very useful because, again, this represents that the vaccine works at least for one of the strains for the seasonal flu and that is a big step forward in hopefully getting approvals for doing clinical trials with a trivalent vaccine in Mexico.

Great.

And I'm just curious.

From an opportunity standpoint, could you characterize the sense of urgency, I guess if any, from the Indian government to provide a flu vaccine to their populace?

I think that they have been very slow in the response so that doesn't bode very well for a sense of urgency but I'm sure that they are doing this for whatever -- for their reasons.

I think from our standpoint, getting a vaccine with the VLP technology approved in India is just a very big step forward for the technology as a whole.

It allows us to get the technology in front of the regulators and will help us grease the wheels for the next round of products that we expect to develop for the Indian subcontinent and I think from a proof of concept standpoint for the VLP technology this is a much more strategic value.

Okay.

Great.

And just finally, Fred, do you have a share count, a current share count?

Yeah, Bud.

Total share count right now is about 100 million shares, total shares outstanding.

That is as of early February here?

It is as of -- it will be as of this coming quarter's 10-Q.

Okay.

Okay.

Great.

Thank you both.

Thank you, Bud.

Thank you, Bud.

Thank you.

This does conclude the question and answer session in today's program.

I would like to hand the call back to Novavax for any further remarks.

Okay, thank you, John.

Again we want to thank you for your time and attention this morning and appreciate your interest in our progress.

With your support we continue to execute our development programs well, and are on track to reach several significant milestones this year.

We look forward to providing an update on our progress on our next call later this summer.

Have a great day.

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

This does conclude the program.

You may now disconnect.

Good day.