Sarepta Therapeutics Inc (SRPT) 2004 Q4 法說會逐字稿

Welcome to the AVI BioPharma 2004 fourth quarter financial results conference call. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded today, March 8, 2005.

I would now like to turn the conference over to Ms. Jody Cain. Please go ahead ma'am.

This is Jody Cain with Lippert/Heilshorn & Associates. Thank you for participating in today's call.

Joining me from AVI BioPharma are Denis Burger, Chairman and Chief Executive Officer, Alan Timmins, President and Chief Operating Officer, and Mark Webber, Chief Financial Officer.

This morning AVI BioPharma released financial results for the 2004 fourth quarter and year. If you have not received this news release or you'd like to be added to the Company's distribution list, please call Lippert/Heilshorn in Los Angeles at 310-691-7100 and speak with Eleanor Tang. This call is also being broadcast live over the Internet at www.avibio.com, and a replay of the call will be available on the Company's website for the next 2 weeks.

Before we begin I would like to note that comments made by management during this conference call will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors I encourage you to review the AVI BioPharma annual report on Form 10-K and subsequent reports as filed with the Securities and Exchange Commission.

The content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, March 8, 2005. The Company undertakes no obligations to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Denis Burger. Denis.

Thank you, Jody, and thank you all for joining us. This morning's call will follow our standard format. Following my opening comments, Mark Webber will summarize our financial results, Alan Timmins will then address our operations and recent accomplishments, and I will conclude the prepared remarks with a review of our upcoming milestones.

Based on significant progress with our many promising antiviral drug candidates I am now more convinced than ever of the potential of our proprietary NeuGene antisense technology to revolutionize drug therapy. We designed our third-generation NeuGene technology to overcome what we perceived as potential shortcomings with second-generation antisense technologies. Last year we witnessed several late-stage clinical failures with drugs based on earlier generations of antisense by other companies.

In contrast, our NeuGene drug candidates continue to demonstrate stability, specificity, safety, and efficacy as seen in clinical trials to date involving more than 300 patients. We are focusing a majority of our resources on our viral and cardiovascular programs as we believe that they represent the fastest and most cost-effective means for to us reach drug commercialization.

During the past 2 years we have proven time and again our expertise in developing NeuGene compounds that address single-stranded RNA viruses, many of which have no treatment alternatives. Based on NeuGene antisense versatility, we are able to develop drugs to combat a variety of viruses at speeds unheard of in drug development. We call this our rapid response therapeutics.

Our NeuGene technology is now being investigated with 17 viral families including a total of 45 viruses, as well as toxins and bacteria that are threats to our global healthcare environment. Further, we are now involved in collaborations with approximately 50 scientific investigators worldwide.

Among these include-- the Centers for Disease Control and Prevention, the Walter Reed army hospital, the Southern Research Institute, the U.S. Army Medical National Institutes of Allergy and Infectious Disease and the Scripps Institute of Research. Our studies have re-- gained the support from 3 cooperative research and development agreements, or CRADAs, and 3 National Institutes of Health, NIH grants.

Collaborations, development agreements and grant support with viral diseases that we may not otherwise have been able to pursue without dedicating our full resources to support these programs. Further, positive results from these studies by independent corroborators increase our confidence that we can be efficacious in large market opportunities with this viral group.

It is not our intention to immediately pursue the clinical development of all viral programs underway. Importantly, data from each study helps to strengthen our NeuGene knowledge base. We have learned the subtleties of targeting RNA viruses, increased our knowledge in dosing regimens and enhanced our capability in designing and potentially commercializing effective agents for both emerging and engineered pathogens.

We are now better prepared to move more quickly and confidently into our hepatitis C virus efficacy studies. Additionally, much more of our work in 2004 has enabled us to move closer to-- in establishing the groundwork for our planned entry this year into late-stage clinical trials with our cardiovascular program. More on that later.

We have also been working diligently towards securing corporate partnerships to support our robust pipeline of longer term programs including those in cancer therapeutics, polycystic kidney disease, and drug metabolism.

With those opening remarks, I now ask Mark Webber to review our recent financial performance. Mark.

Thanks, Denis. Today I'd like to review our 2004 fourth quarter and year-end financial results and our cash position and then I'll introduce our financial guidance for 2005.

Our revenues for the fourth quarter of 2004 were approximately $286,000, which compares with revenues of approximately $135,000 reported in the fourth quarter of 2003. Operating expenses in the 2004 fourth quarter were $5.2 million compared with $7.3 million in the comparable quarter of 2003. The decrease was due to lower research and development costs, which were $3.8 million for the 2004 fourth quarter, down from $6.4 million reported in the fourth quarter of 2003.

Approximately $2.2 million of this decrease in research and development was due to lower contracting costs for the production of GMP subunits. Our net loss for the fourth quarter of 2004 was $5 million, or $0.14 per share, which compares to the net loss of $3.1 million or $0.10 per share for the fourth quarter of 2003.

Revenues for the full-year 2004 were approximately $430,000 compared with revenues of approximately $970,000 reported for the full-year 2003. This decrease was due to decreases in research contract revenues, partially offset by an increase in grant revenues.

Operating expense increased in 2004 to $25.5 million from $19.8 million in 2003. This was due to increases in research and development for approximately $15.3 million in 2003 to approximately $20.7 million in 2004. Primarily as a result of manufacturing costs associated with our clinical development efforts, including approximately $4.2 million associated with contracting for production of GMP subunits which are used to manufacture compounds for future clinical trials. The remaining difference was due to increases in outside collaborations and regulatory affairs costs as well as additional preclinical and clinical testing of our products.

For the year ended December 31, 2004, our net loss was $24.8 million or $0.69 per share, compared with a net loss of 14-- 14.6 million or $0.49 per share for the year ended December 31, 2003.

Reviewing our balance sheet-- at December 31, 2004, we reported cash, cash equivalents and short-term securities of $19.5 million, a decrease of $18.1 million from December 31, 2003. This decrease is attributed primarily to $23.8 million used in operations and $1.5 million used for purchases of property and equipment and for patent related costs.

This is offset by the receipt of $7 million in net proceeds from the exercise of warrants issued to several institutional investors for the purchase of 1.6 million shares of our common stock at $4.62 per share. These warrants had been issued pursuant to a direct equity placement of the Company's common stock in December 2003. Total share of equity at the close of 2004 stood at $26.3 million.

Additionally, we were informed in 2004 that AVI would be allocated $5 million in government funding for the 2005 fiscal year for work on 2 viral disease research projects. These funds have yet to be received and are not reflected in our financial statements.

In January 2005, we announced a direct equity placement with several institutional investors for the purchase of 8 million shares of AVI's common stock at $3 per share with gross proceeds to the company of $24 million. Proceeds from this placement will be reported in our March 31, 2005 financial statements.

Regarding financial guidance for 2005-- we expect expenditures to be in line with 2004 and the cash burn for 2005 to be in the range of 25 to $27 million.

With that overview I would like now to turn the call over to Alan Timmins.

Thanks, Mark, and let me add my welcome to those of you joining us this morning on the call and on the Internet.

I'd like to spend a few minutes discussing more recent developments beginning with our stem cell announcement. Needless to say, stem cell research has been the topic of numerous headlines during recent months. In January, we announced the grant of patent-- of a patent covering the use of antisense to modulate stem cell maturation. Our NeuGene antisense agents have been shown to program stem cells in culture for long-term survival after implantation, which represents a powerful tool in the emerging area of stem cell therapy.

When harvested, stem cells are cultured to increase their numbers. They most often differentiate and lose their stem cell character. Our NeuGene technology has been used successfully to inhibit differentiation in culture resulting in stem cell preservation and expansion and ultimately leading to long-term survival and functionality in recipients.

We believe that our work could position us as significant resource for all future stem cell applications. As part of our broader program in immunology, stem cell applications represent a third area of nearer term emphasis for AVI, along with cardiovascular applications and infectious diseases.

Turning to developments with our Ebola virus program, Ebola Zaire virus is endemic in Africa, where approximately 1850 cases and 1250 deaths have been reported since 1976. Ebola virus causes lethal hemorrhagic disease and is a National Institute of Allergy and Infectious disease priority A pathogen, and a bioterrorism suspect agent of interest to the department of defense.

There currently are no approved treatments for Ebola infection. We've produced NeuGene agents to target 6 of the 7 major Ebola genes. We've shared our experience with Ebola with the U.S. Army Medical Research Institute of Infectious Disease or USAMRIID, when a researcher was accidentally exposed to the Ebola virus while working with Ebola- infected mice. This event provided a stunning example of the speed in which we can produce antisense-based drugs to target a specific viral infection.

Since that time we've developed a formal 5-year CRADA, cooperative research and development agreement, with USAMRIID, as well as with the Centers for Disease Control and Prevention and Walter Reed army institute of research. In addition we obtained approval for $5 million in support from the department of defense budget to expedite preclinical development of an Ebola virus drug candidate. Pharmacology and toxicology studies have been conducted in mouse, rat, and primate models to evaluate candidates for multiple gene targets.

Since entering into this collaboration we've reported positive results from extensive in vivo experimental testing of our NeuGene drugs against the Ebola virus in animals. Certain of our NeuGene drugs and combination drugs have completely protected animals from a challenge with a dose of lethal Ebola virus that would usually be deadly in 7 to 10 days.

This program's expanding to include other viruses of interest. For example, the Marburg virus. Denis mentioned the importance of data from ongoing research on various antiviral programs in augmenting our collective knowledge about our NeuGene technology. Our studies in Ebola Zaire virus have further added to our dosing knowledge as well as our routes of administration and combination therapy approach knowledge.

Finally, I'd like to comment on our ongoing study with West Nile virus. Our West Nile virus program showcases our rapid response therapeutics capability as well, as the time required from drug candidate identification to clinical program initiation spanned less than 10 months.

To briefly review our progress, our first West Nile virus clinical trial exhibited drug candidate AVI-4020's excellent safety profile. It further demonstrated this drug's ability to successfully cross the blood-brain barrier in all patients, which may ultimately prove crucial for those with advanced neurological impairment.

With few alternatives for patients with West Nile virus-induced neurological symptoms, we honored a compassionate use request last year. Last August we initiated a second clinical trial with AVI-4020 based on significant interest level from hospitals and institutions located in the southwestern United States. Then the area with the most pronounced increase of West Nile virus during last year's West Nile virus season.

This is a multicenter study designed to include 50 patients with presumptive acute West Nile virus neuro-invasive disease. The trial protocol calls for a higher dosing level of AVI-4020 than our first trial, and is expected to provide an additional demonstration of our drug safety as well as allow for an opportunity to evaluate efficacy. The trial remains open for enrollment during this year's season.

Officials in California, where several of our clinical sites are located, are warning residents about a greater threat of West Nile virus this season, as the heavy rains may facilitate mosquito proliferation. As we've discussed before, the West Nile virus program doesn't fit into our development criteria as the market opportunity is limited. The value of these studies, however, relates to their applicability to our hepatitis C preclinical and future clinical development program, by providing us insights that we expect will shorten the clinical time frame associated with this program.

With that I'd like to turn the call back to Denis.

Thanks, Alan.

In reviewing our milestones I would like to begin by providing a progress report on our cardiovascular program. As we have discussed, we intend to commercialize AVI-4126, NeuGene-based products, for the treatment of cardiovascular disease, through a combination of internal development programs and partnering activities with 2 distinct approaches.

First, delivering our drug locally on a stent platform and second, delivering our drug systemically with our micro-particle delivery system, or Resten-MP, for use in conjunction with other bare metal drug-- or drug-eluting stents.

For delivery of Resten-NG on a stent platform, we intend to initiate Phase III clinical trials with our own drug-eluting stent in Europe, which will lead to a CE mark approval if clinically successful. To accomplish this, AVI has recruited a team led by Joseph Horn, who has extensive experience with devices used in interventional cardiology and direct experience in clinical trials and the approval process in both Europe and America.

Under his direction, AVI has successfully developed and assembled the components that it believes will be the next generation of drug-eluting stent, or DES. The most important component in the system is the drug. And Resten-NG has advantageous characteristics when compared to the drug component in Cypher or Taxus drug-eluting stents.

AVI is advancing a non-polymer loading and elution system for Resten-NG in light of the recent healthcare issues concerning all polymer-based systems. Although this has taken longer to develop than a polymer-based system, AVI believes that the few extra months in development will outweigh the medical and economic advantages of the first polymer-free DES in the marketplace.

AVI expects to make CE-marked application for its proprietary stent, the metal stent foundation for its DES, in the second quarter of this year and initiate CE mark trials for its polymer-free Resten-NG DES by year end. AVI plans to initiate additional clinical studies with Resten-MP later in the second quarter in combination with bare metal stents in Europe. Resten-MP again. is AVI-4126 formulated for systemic, rather than DES delivery via intravenous injection using AVI's patented micro-particle delivery technology.

In preclinical studies, this formulation was as effective as Resten-NG delivered by catheters or stents in preventing cardiovascular restenosis and demonstrated many advantages. In some European markets, drug-eluting stents only represent about a third of the market today, due to combination of costs, perceived polymer drawbacks and other concerns, so there is a terrific opportunity here.

Now turning to our infectious disease programs. Based on preclinical studies, we plan to file an IND application to initiate human clinical trials with our NeuGene drug for hepatitis C later this year. A disease of the liver, hepatitis C is often associated with blood transfusions and is the principal cause of chronic liver disease, the tenth leading cause of death among U.S. adults and the number one cause of liver failure.

The market size for HCV is estimated to be between 10 and $20 billion worldwide. Also, we are moving forward with our dengue virus program in collaboration with the CDC and we expect this to be the next viral program to move into clinical development following HCV.

Moving to our oncology program. We plan to initiate an additional cancer study in the next few months using AVI-4126 in a safety and efficacy trial in bladder cancer. As cancer clinical studies are typically lengthy and costly, we are actively seeking pharmaceutical partners to advance our oncology program into late-stage development.

In closing, we are exceptionally pleased with progress in our NeuGene programs, particularly given the current environment in which, by design, we are deliberate cautious and focused before advancing into late-stage studies. We are collaborating with well-respected institutions and are developing a knowledge base that will improve our ability to bring drugs to market. We have robust preclinical and clinical data which has been corroborated by numerous outside sources.

We are now ready to proceed with additional studies with sound, carefully planned trials designed for success, with our near-term opportunities in cardiovascular and viral diseases as well as longer term opportunities in cancer, PKD, drug metabolism, among others. As Mark mentioned, we strengthened our balance sheet earlier this year through a financing that will support our development programs going forward.

At this time I'd like to open your call to questions. Operator?

[OPERATOR INSTRUCTIONS]

While we wait for that first question, I would like to welcome Mike Forrest to our board of directors. Mike has been appointed to fill the seat vacated by Dr. Ray Ruddon who recently has moved from the position as a chief scientific officer at J &J to Assistant Dean of research at Michigan and found that his time constraints were a little too much for our board of directors. And his scientific background is more suited to a position on our scientific advisory board.

So Dr. Ruddon has taken a position to support our Senior Vice President of Research, Pat Iversen on our scientific advisory board, and Mike Forrest brings his considerable experience to our board of directors. Mike has a history of over 20 years of experience in-- with major pharmaceutical companies Pfizer and American Cyanamid and recently experience as CEO of 3 different biotech companies, most recently Cellegy Pharmaceuticals. Thanks for joining us, Mike.

Our first question comes from the line of Ren Benjamin with Rodman & Renshaw. Please go ahead with your question.

Hi. Good morning, guys and congratulations on your ongoing progress.

Thank you, Ren.

Can you talk to us a little bit about the potential for applying the NeuGene antisense to a new infectious disease that seems to be gaining more and more headlines, the avian flu?

I'd be happy to.

Avian flu is an offshoot of influenza and these are once again single-strand RNA viruses where our technology has proven most useful. One of the issues with any of the flu strains is that they mutate rapidly and the protein coat of the viruses are different each year so that each year you sort of have to reinvent the type of vaccine to utilize.

The avian variety of this virus is particularly nasty because we don't see it every couple of years but rather once every other decade or so. It's a disease transmitted basically in avians, in chickens, and by direct contract to man, and it usually takes some decade or, so 10 to 20 years, for it to mutate to be able to be transmitted from man to man.

When it can be transmitted man to man, it-- because if we haven't seen it in the the last couple of decades, it then produces a devastating endemic as in the influenza endemic of 1918; that was avian. We are very actively and very aggressively trying to pursue, at the research stage, antisense towards this agent.

I think it's now expected, and we've all heard Dr.-- the various leaders of the CDC, comment on the transmission now documented in Asia from man to man. And Dr. [Gerberling] has said that we should expect this agent in the next few years. So, we're aggressively going forward.

We believe we have a real shot at it, and we believe that with our technology, we'll avoid having to reinvent the drug as the surface proteins mutate every couple of years. So we're very interested, very hopeful that we'll be able to address this like we can address most single-strand RNA viruses.

Are you working with a government agency on this?

The government has absolutely expressed direct interest in that. We are currently not dealing directly with, for example, the National Institute of Allergy and Infectious Disease, but there are-- there is interest at the moment from other agencies of the government that we're developing relationships with.

So, if-- if-- if we have to get a sense as far as time lines are concerned, would you be able to comment on-- on how this could proceed? Would you-- based on-- based on your talks with government agencies now, would you imagine being in preclinical studies in the first half? How do you see this proceeding?

First off, we see that the program is joint with regular influenza A types in addition to the avian influenza H type. So we believe we're going to have a potential drug for both. We expect this year, most of the studies will involve culture work and targeting and preclinical work early next year.

Okay. What are the chances for you guys to qualify for BioShield, or any version of the BioShield?

That's great question. I think that the chances are quite good. I think the-- there's still a bit of mystery surrounding the administration of BioShield from the government's aspect. Certainly our programs-- certain of our programs would fall right into what a layperson would think would be directly interesting to BioShield.

At the current time, I think the BioShield program itself needs to get its house in order in terms of how it will administer itself, how it will let purchase orders-- how it will identify disease types in what order, those sorts of things. But we're certainly well on the track in putting ourselves in a position to be able to take advantage of that, at the time that they're able to administrate the program in an efficient manner.

You might know that there's proposed legislation called BioShield 2 and another bill that I believe is called S-3, or S-6, my memory is failing me at the moment, those, I think, are important bills in that they will clarify and hopefully enhance the ability with which the Department of Health and Human Services or other departments can correctly, efficiently administer the BioShield program.

If you can just help me understand the-- I think for this year all the applications are done, so if you-- if you were to apply for this it would be sometime next year? Would that be correct?

I'm not-- I'm not salient on the exact timing of applications. What I know is that the BioShield group at Health and Human Services, they will identify a virus of interest, and then they'll request proposals in that arena.

I think that-- so the timing of that is more determined by them deciding that there was a particular virus that they wanted to go after, rather than us saying we've done work in, for example, Marburg virus, then turning to them and saying, do you want to purchase our efforts, or our product in Marburg virus? A little bit of it is, they need to identify in some order, which is probably not determined yet and not even known to them, when and how they'll go about letting requests for proposal on different projects.

Fair enough.

What's happening with the cardiovascular trials, if I remember right that were started in Nebraska and South America? I think they were using-- testing Resten-MP.

We're currently ongoing in Nebraska with our trials of Resten-MP and those are, in Nebraska, used in combination with drug-eluting stents. So either Cypher or Taxus. So, in addition to that ongoing study, later this quarter we're going to initiate a trial with Resten-MP on-- versus-- in combination with bare metal stents in Europe. And as we're initiate that trial, provide more details about the size and the scope.

As you probably know, in countries like Germany, only one-third of the stents that are placed at balloon angioplasty are the drug-eluting stents and two-thirds to this point in time are not. And that's because of some of the cost issues around drug-eluting stents. But also some of the issues around the consequences of the polymers that are on-- that are used in conjunctions with the drug-eluting stents.

So, we have-- of course, are very interested, and we've shown previously preclinically that our Resten-MP was as effective in preventing restenosis as either using a DES or delivering the drug with a catheter.

When might we expect some data from the Nebraska trials?

I would think early next year.

Okay.

And then just 2 housekeeping questions. What is the current total shares outstanding and fully diluted shares outstanding, and why did the SG&A go up in the fourth quarter?

Mark, are you looking up that number?

In round numbers, the outstanding shares total 44 million shares, and the fully diluted shares are approximately 14 million more than that. So in round numbers, in the high 50s, low 60s.

Okay.

Anything about the SG&A? It seems like it went up by $1 million or something like that.

We added-- earlier in the year we added some folks in our clinical development program, really comparing quarter-to-quarter it's only up about 180,000 from last year.

Oh, okay. Fair enough.

Thanks, Ren.

Thank you.

Your next question comes from the line of Tom [Schroeder] with [Jala] equity. Please go ahead with your question.

Hi, guys. Congrats on a nice year.

Thank you.

Just a quick question. I know there's been a lot of talk about the drug-eluting stents lately. There was a Wall Street article-- a Wall Street Journal article about them. Just wanted to see if you guys had any comment about what that might mean for AVI?

Yes. Thank you for the question.

On Monday The Wall Street Journal had an article on drug-eluting stents. The article is written in a little bit of a confusing manner. At the basis of this article is a study commissioned by Johnson & Johnson, where they directly compared their Cypher stent head to head in a trial designed to show superiority against the Boston Scientific Taxus stent, and it did not. So, it didn't reach its primary endpoint of showing superiority over Taxus. Now, those results are not presented in the article.

What is presented in the article are some side effects that resulted from-- in the study, from both Cypher and Taxus. And those side effects are called, in the article, blood clots. That, of course, is thrombus formation. And the reason that you have blood clots, or thrombus formation, in association with drug-eluting stents is because of the polymer that remains after the drug is gone.

And if you think of a drug-eluting stent as a little bit like the skin of an onion, where you have layers and layers of polymer and drug, and the idea is to release-- with these 2 drugs, is to release the drug over a period of time that might be weeks to a month. What you're left with then is this large scaffold of polymer that doesn't go away, and the polymers all cause problems. And the problems they cause is that they are sticky to platelets, which causes blood clots called thrombus formation.

To avoid that, patients have to be kept on, possibly forever, on thrombolytic drugs like Plavix. And after 2 years of drug-eluting stents, attempts were reported last year to take patients off Plavix which resulted in strokes and heart attacks. That's the result, of course, of this thrombus, or blood clot formation.

So, the hazard of the polymers associated with D-- with drug-eluting stents is that you have to keep patients on Plavix and other antithrombolytic drugs possibly forever, and that's very expensive, and that's one big concern that the Europeans have. And, even in the face of these-- keeping the patients on the drugs, as reported in this study in the Wall Street Journal, you still had from 0.5 to 1 percent of the patients that developed this thrombus formation.

In addition, in the study, was a comparison done in Germany with Cypher and Taxus, where Taxus resulted in a restenosis rate of about 16 percent, and Taxus about 7 percent. And that isn't very good. 16 percent isn't very different than using a bare metal stent.

Also in the article was a comment regarding Medtronic which will introduce their J&J sort of knock-off, if you will, called Endeavor into Europe and they reported some results but using a different endpoint. So it's usually a little bit hard to compare. What this really says all taken together, is AVI has a huge opportunity.

The opportunity is both our drug is less toxic and gets at the mechanism behind restenosis, rather than treating the symptoms. Our drug has advantages over the Cypher or the Taxus or Medtronic drug, and in addition we hope to introduce that drug in a polymer-free system and avoid the life-long requirement for the thrombolytic continuing drugs.

So that's sort of the essence of trying to put our application into this current study that was commissioned by J&J and failed.

Excellent. Great. Got you. Thanks, guys.

[OPERATOR INSTRUCTIONS]

Your next question comes from Quynh Pham from Delafield Hambrecht. Please go ahead with your question.

Hi. Good morning.

Good morning.

Wondering if you guys could give me your current cash position?

Yes, our current cash position is a little over $40 million, and that's as we sit today without considering the $5 million allocation that we expect this year from the Department of Defense.

Okay.

And then additionally, what kind of price tag are you setting on these Resten trials that you plan to initiate later this year? And how large do they need to be?

Right.

The Resten-MP study that we're doing in Europe in combination with a bare metal stent has a price tag on it of less than $1 million, and the drug-eluting stent study for CE mark is a larger study, but the entire trial comes in with a price tag of under $2 million.

Then, how many patients are you recruiting for these studies at the price targeted?

The Resten-MP study where we are looking at our drug in combination with bare metal stents is approximately 50 patients, and that's, by a statistician's, been determined enough to tell us whether we can use a-- using a database that's available with bare metal stents, will be able to tell whether or not we have a statistical advantage with our Resten-MP product.

The CE mark trials will be approximately 200 patients, and that's, of course, in Europe, the requirement is basically safety, and that's why there's few patients involved, although the studies we will do will have 9-month endpoints of angiography and IVIS because, of course, the efficacy data is crucial for marketing.

Okay.

So given that your ongoing Nebraska trial seems to be-- I think the last guidance was data as sometime in '05, now it's data sometime in early '06, what's affecting the progress of that trial, and how do you expect-- ?

I think that's a very fair question, and enrollment started out very slow, and if you'll remember, at one point last year there was some issues surrounding the J&J Cypher stent which stopped its use in the marketplace, which put a hold on our trial because of the J&J Cypher stent. And we then took a very conservative view and made sure that both the Cypher and Taxus stent had no other recall or hold issues before we reinitiated our enrollment in the study.

But I think aside from that, in the last month or so, enrollment has improved.

So is this data results for early 2006, is this estimate something that's realistic?

Well, that's our best estimate as of today.

Okay. And then concerning your NeuGene antiviral program.

Yes.

You guys are saying that you have robust information to show that the product can be efficacious in the antiviral arena. I just haven't seen robust information. Can we see something that's material any time soon?

Yes, and I think maybe the-- some of the earliest reports will be in the literature in the first half of this year. As you know, as a scientist, when you're done with a study it takes a while to write it up, and then it can often take a a journal up to 6 months to rev-- to accept or review it and to get it as preprints and into press.

So often, you have a full year after you have the data before it's actually in a peer-reviewed journal. And that started well over a year ago, so we expect peer-reviewed publications to appear in the first half of this year. In other words, in the next few months. A couple of which we've already seen the galley proofs for. In addition, we would expect that in the near term you'll see something on our-- in publication from our Ebola studies.

Okay.

And then when you refer to these peer-reviewed publications, what-- which compounds are you referring to?

Well, we're referring to NeuGene antisense drugs against SARS Corona virus, against mouse hepatitis virus, against West Nile, and-- pardon? Influenza A, and Ebola.

Okay.

And then given that you mentioned your cardiovascular and your NeuGene and your stem cell research programs are your nearest revenue drive-- potential route to revenue, what time lines are you looking at here?

Well, the nearest term time lines are in our Resten drug-eluting stent program and in our viral program, Ebola and hepatitis C in the viral arena, and our drug-eluting stent with Resten-NG in the cardiovascular program.

Right. So what time lines are you setting?

Well, the earliest is 2007.

For the Resten-NG?

For both.

For both. Okay. Thank you very much.

You bet.

Our final question comes from the line of Phillip Wiggins with [Farm South] Consulting. Please go ahead with your question.

Yes, this is Phillip Wiggins. This question is directed to Dr. I-- I'm sorry, Dr. Burger.

It's my understanding that some NeuGene PMOs do get into the nucleus of the cell. Can you elucidate what happens from that point forward, and what are the implications?

Yes. Great. Thanks for the question.

Our NeuGene PMOs are neutral in charge, and they do, not only get into the cytoplasm, but accumulate in the nucleus of cells. This has very-- an important implication in terms of regulating events that occur in the nucleus us of the cell, and one of those key events that happens in the nucleus of the cell is called splicing. And that's an event where the little packages of genetic information, that are called exons, are spliced out of a gene or a pre-RNA-- pre-RNA from all of the other information in that particular gene and placed next to each other in an active message.

This exon splicing takes place in the nucleus and that's a way to regulate the type of a protein that is produced. As recently as a couple of days ago, a report in "Nature" by the National Institutes of-- the National Cancer Institute used an antisense mechanism to induce a splicing event to overcome a genetic mutation that took place in lamin A, a particular protein involved in the structure of a cell that leads to premature aging.

Another example of this kind of thing is in muscular dystrophy, where a genetic mutation produces a missplicing event that leads to a protein that is nonsense. The dystrophen protein that leads to muscle weakness and puts kids in wheelchairs. So by having an antisense molecule that can function at the nuclear level, we can influence the splicing event and we can take on diseases that are, quote, examples of aberrant splicing action, and we're actively doing that. So it's a very important advantage that we have a neutral protein that we-- a neutral antisense molecule that has great stability and accumulates in the nucleus of a cell and one that has a mechanism of action that doesn't use enzymes to clip the message, because if you clip the message you don't produce, of course, the protein that you want to correct.

So all of these --

RNase P?

Correct.

Okay. Well, thank you--

In any case this is a very important technological advantage for our chemistry.

Thank you. One quick last question. Are there any competitors to AVI's PMOs, i.e. anyone trying to develop similar neutral charge backbone oligomers?

There are a couple of other neutral oligomers but none of which have entered clinical trials. And they haven't because they have characteristics that are not applicable to meet pharmacokinetic and safety parameters. The PMAs and the 2'O-methyl RNAs are both chemistries which are neutral, but have other disadvantages that don't allow them to meet our characteristics.

Thank you.

Thanks.

We do have one final question from Richard [McCarey] with [Collectible] LLC. Please go ahead with your question.

Good morning.

Good morning.

One of the things you brought up, you mentioned the work that you're doing on West Nile, and how that would be helpful to you against HCV. Can you elaborate a little bit? Because my understanding is that-- that obviously the NeuGene platform applies to all the various single-strand RNA viruses, but this one has a very large potential market commercially.

In a related question. Do you plan on developing your hepatitis C therapy in collaboration or cooperation with I think what we would think as one of usual suspects out there that are pursuing hep-C therapies, or do you plan on going this and filing an IND yourselves? So, I'd just like to get some background on that.

Sure. Good question.

First off, because of our West Nile studies in the clinic, we know about the routes of administration and the pharmacokinetics, so we know what it takes to deliver the right dose of the drug to various organs and sites that are important, and we know that we can deliver it across the blood-brain barrier.

So tox, pharmacokinetics, site of action, delivery all have been gleaned without yet delivering our hepatitis C agent to humans, so that's been very important and led us down that path and I believe has taken time off our hepatitis C development program.

In answer to your second question in regards to our strategy, we expect early-- later this year to file the IND for hepatitis C. We're close in that we've are just winding up the GLP toxin pharmacokinetic studies for that filing, and we've already had some pre-IND meetings with the FDA, so we will file the IND, we will conduct the Phase Ib safety and efficacy study ourselves in-house, and we've lined up investigators and protocols to do that.

But we plan to use that data from the very early clinical studies to secure a partnership from, as you put it, one of the usual suspects to take that further. So we're on a track to partner hepatitis C as early as possible after we have the initial safety and efficacy data from our Phase Ib study that we hope to start later this year.

Great.

On the cardiovascular program you did mention-- this is the first I had heard of it, this nonpolymer system. Is this a-- is this an intellectual property of the Company or is this just another methodology by way to deliver it? And is it competitive with what you're doing in the micro-particle delivery system?

Yes, we have 2 different approaches.

The micro-particle delivery system is a way of being able to deliver the antirestenosis drug in combination with any device that might be implanted. So a bare metal stent, a DES, and to be able to do that more than once maybe after the drug is eluted in the case of Cypher or Taxus, you'd want some additional protection at monthly or quarterly or yearly intervals. So, it's designed as a very broad product. On the DES platform the downside of the polymer systems is that they cause inflammation.

And the other drugs that are used, Taxus or arapamycin or arapamycin knock-offs, in the case of Medtronic, require that polymer absolutely because of the mechanism of action of those drugs, the drug has to be delivered slowly over a couple of weeks, or more. Because the mechanism of action of our drug is distinctly different and we want all of the drug delivered in a very short period of time, maybe within 24 hours with the bulk of the drug in that 4 to 8-hour time frame, we don't require the polymer.

So we have-- and I don't know whether you'd call that an intellectual property advantage. It's just an absolute advantage for us to come out with a polymer-free system and avoid all the issues of thrombus formation and continued life-long Plavix and other issues around blood clots with the polymers that are left on the stents.

Thanks for the question.

All right. Very promising. Thank you.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Well, just as a closing remark, I'd like once again to thank Mike Forrest for joining our board of directors, Michael Buchmeier for joining our scientific advisory board, and thank you all for sticking with us through the last couple of years. We're now at a very advantageous point in our clinical program, and we look forward to updates at our next conference call. Thank you.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.