Sarepta Therapeutics Inc (SRPT) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the AVI BioPharma quarterly earnings call. Please be advised that this conference is being recorded. There will be a question-and-answer session during the conference. (OPERATOR INSTRUCTIONS)

I would now like to turn the meeting over to Mr. Michael Hubbard, Director of Corporate Communications. Please go ahead, Mr. Hubbard.

Thank you, Julian. This is Michael Hubbard, Director of Corporate Communications for AVI BioPharma. Thank you for participating in today's call. Yesterday we released our financial results for the first quarter of 2008 which are available on our Web site at www.avibio.com.com.

Joining me this morning from AVI are Dr. Leslie Hudson, Chief Executive Officer; and Alan Timmins, President and Chief Operating Officer. Before we begin, I'd like to remind you 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'd encourage you to review the AVI BioPharma annual report on Form 10-K and subsequent reports as filed with the SEC. Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, May 13, 2008.

The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that I'd like to turn the call over to Dr. Hudson.

Thanks, Michael, and thanks to all of you for joining us today. We want to give you an update on our financial report and earnings release, but before that I'd like also to very briefly use the corporate priorities as a way of actually updating you on things that are, in terms of our R&D program and the partnership priorities, important to the Company as a whole.

So you'll remember that our corporate priorities overall first of all were to advance the clinical programs. These are both Duchenne and cardiovascular restenosis as well as a whole viral program in Ebola, Marburg, Junin and Dengue virus infections. And then, secondly, around DMD, in particular, the Company has actually focused in on particular exons and we'll say more about Exon 51, 50 and 46.

We expect to have approval shortly to go into a systemic study for AVI-4658 and we are also in a situation where having been granted orphan drug status by the FDA we are in the process of filing for similar status in Europe. With CABG, we are conducting a futility analysis. This is, in fact, cabbage the trial which is being conducted by AVI itself for the prevention of occlusion after grafting with saphenous veins and this is for AVI-5126. I will say more about that later.

For Ebola and Marburg we issued a press release about 35 minutes ago which summarized some of the advances that we've actually been able to record with USAMRIID. The reason for the release in particular is we actually have a lot of repeat data now which has confirmed some of our earlier findings that have already been reported. So we'll go into that in somewhat more depth both in terms of my remarks after Alan, and also in terms of the question-and-answer session I suspect.

With Junin and Dengue we basically don't have any update this morning other than to say that we now have a contract in place for the Junin study. This will be a lab study for animal testing and in terms of Dengue, we expect that to advance according to the corporate priorities which we've already communicated earlier later in this year. We expect that to go forward and we can talk about that.

You saw also yesterday a press release around the TNF receptor 2 project. That was published in "Molecular Therapy" and that was the subject of a separate press release. The other areas in terms of our corporate priorities is to complete the portfolio of discovery projects for drug candidates which direct alternative splicing. Since the last call you will have saw that we appointed Richard Kole, Ryszard Kole, as Senior Vice President of Discovery Research.

There have been a few other senior changes which I'll review after Alan's financial overview. And finally in terms of the ability to secure an additional revenue producing partnership we think that the Ebola and Marburg work we've been doing has groundbreaking potential, and are actively seeking a commercial partner as we gear up for the next stage of clinical and commercial development of this very exciting program.

So I'll give you some more detail, both as prepared remarks and during the Q&A part of this call, once Alan has been through our quarterly numbers. So without further ado, I will turn the call over to Alan Timmins for an overview of our first quarter earnings release. Alan?

Thank you, Les, and good morning to all of you joining us on the call and over the Internet. Today I'd like to review our 2008 first quarter financial results including our current cash position and also discuss our continued 2008 financial guidance. Our revenues for the first quarter of 2008 were $5.6 million, up from $536,000 in the first quarter of 2007, reflecting an increase in research contract revenues of $5.1 million partially offset by a decrease in grant revenues of $19,500.

Our operating expenses for the 2008 first quarter were $19.4 million compared with $10.6 million for the 2007 first quarter. This increase was due primarily to the asset acquisition of Ercole Biotech Inc. and due to some higher research and development expenses. During the first quarter of this year we completed an asset acquisition of Ercole resulting in a $9.9 million acquired in-process research and development expense.

So please note that the expensing of the in-process R&D of $9.9 million and other Ercole related entries in the first quarter are essentially the entire financial statement impact of this acquisition. Other than that expense we have not seen, nor do we expect to see, a significant net increase in the ongoing operating expenses of the now combined companies.

Our research and development expenses for the quarter increased to $7.5 million from $6.3 million in the first quarter of 2007. This increase reflects $800,000 in government research contract expense, a $580,000 increase in compensation costs, $402,000 in severance payments to certain Ercole employees and a $400,000 increase in net clinical expenses.

These increases were partially offset by a $425,000 decrease in professional consultant costs, a $245,000 decrease in chemical costs, a $225,000 decrease in purchases of government contract related equipment, and a $190,000 decrease in the amortization of patents and leaseholds. Our general and administrative, or G&A, expenses decreased to $2.0 million from $4.3 million in the prior year period.

The decrease was due primarily to a $2.2 million decrease in employee costs, of which $1.6 million, including $562,000 in cash compensation and $1.1 million in SFAS 123R expenses, were related to the separation and release agreement with the Company's former Chief Executive Officer during the first quarter of 2007. Additionally, there was a $530,000 decrease in SFAS 123R expenses. G&A expenses also included a $150,000 decrease in legal fees.

We reported a net loss for the first quarter of 2008 of $15 million, or $0.23 per share inclusive of the aforementioned $9.9 million of acquired in-process R&D expense compared with a net loss for the first quarter of 2007 of $8.2 million, or $0.15 per share. Reviewing our balance sheet, we recorded cash, cash equivalents and short-term securities of $20.2 million as of March 31, 2008, a decrease of $4.8 million from December 31, 2007.

This decrease was primarily due to $4.4 million used in operations and $339,000 used for purchases of equipment and patent related costs. This decrease included approximately $900,000 advanced to Ercole for its use in retiring certain of its debts prior to the closing of the Ercole asset purchase.

For our 2008 financial guidance we expect our net cash burn for the year to be in the range of $16 million to $19 million. With those comments, I'd like to turn the call back to Les.

Thanks, Alan. So in essence, then, our financial strategy has been in the near term to cover as much of our R&D programs as possible. You know, obviously, about the work that we are doing with the government. That's a fully funded contract in the antivirals programs that we have already talked about and we will talk about more again this morning.

Also, for example, in DMD, that has now become a very important program not only to us but also actually at the level of national funding in the United States. So, for example, one of the areas around Exon 50 is funded by Charlie's Fund. Those sorts of near term opportunities are very important to us, not only does it give us actually a financial offset but at the same time it gives us the opportunity to work with the quite well-established and evolving clinical networks.

The restructuring programs, both in the restructuring of the Company, both in both in terms of programs and also the Company itself, that will take further hold as we actually move through. And some of those announcement have already been made and we expect to actually continue that with our new business plan as that actually kicks in the year that we are actually currently in in 2008. So in April, we announced some key appointments along with some changes in roles, all geared to our corporate goal of becoming a Company that is focused on product development.

So first we welcomed, as you heard, Richard Kole, Sir Ryszard Kole, either will do, as Senior Vice President of Discovery Research. Richard resigned from his professorship at UNC and is already working with us here in Corvallis on the West Coast. As many of you know, Richard is a pioneer in the use of oligonucleotides for the modulation of splicing. He was indeed the co-founder and president of Ercole Biotech.

That appointment then allowed Pat Iversen to assume a new role as Senior Vice President of Strategic Alliances. As you know, Pat was our Senior Vice President of Research & Development, and in his new role he'll manage AVI's ongoing programs and government contracting as well as focusing our external collaborator network for the identification of novel drug targets, both for the Company and also for external partner R&D programs.

So again you will see that that focus on the government programs is important not just because we have government contracts, but also because we believe it's a major partnering opportunity and in the same way we believe that there are applications of antisense which will become increasingly realized by future potential partners for us. Both Dr. Kole and Dr. Iversen are very passionately committed to drug discovery and have very complementary skills. They provide excellent synergy both in their new roles and also as people.

So AVI's technology and infrastructure has the capacity to drive not only its own in-house R&D programs but also those of external partners. Currently, as you know, we have just one partnership which is actually with Cook Medical for the development of AVI-5126. So one of the corporate priorities is to increase that.

In addition to these roles, we also welcome Hans Wigzell to the new corporate strategy board. Hans, although he is exceptionally gifted as a scientist, he also has a very special understanding and a deep track record on commercialization. The legacy of his time, he is President of the Karolinska Institut and Chairman of the Nobel Prize Committee, transcended his scientific contribution alone. So from that point of view we are actually very pleased that Hans is going to be working with us.

In terms of our clinical development portfolio, the AVI-4658 DMD program in Duchenne Muscular Dystrophy, as you know we have an ongoing program in the United Kingdom. We saw, as indeed many of you will have seen, last week that Medex, which is the collaborative group that we are working with, announced that given the safety profile they have requested a protocol modification to skip to the highest dose allowed of the three dose groups. We see this as a positive outcome.

As you can imagine these trials are very, very carefully monitored because basically they involve young children and that's part of the reason why this study's protocol was being conducted patient by patient. But given that the end points of the particular study that we've seen, we view this positive change as being something which we welcome.

Equally importantly the Medicine Healthcare Product Regulatory Agency, this is the European regulatory agency, indicated that the existing data package should support the proposed systemic study or IV clinical study in ambulatory DMD patients. As you know from our corporate goals we believe that we will have the opportunity of conducting that study of AVI-4659 later this year. Clearly, systemic exposure is extremely important for us.

The focus around Exon 51, and 50, and also 46 is something that we believe was very important initially to start with exon skipping applied to single exons, and we are talk more about more of this in terms of the strategy in the Q&A session depending on the degree of interest. That's really a clinical strategy.

In terms of our Discovery Research, we expect to start looking at the ability to skip not just one but potentially one and more exons at the same time. This notion of block skipping would clearly allow one then to address a wider and wider proportion of the Duchenne Muscular Dystrophy patient population rather than approaching each disease one exon at a time.

In terms of the cardiovascular program, the status as far as Cook is concerned is unchanged. We are supporting their program. As you know, Cook as a private company has no reporting requirements and other than looking very happy which on the telephone is useless, obviously, in terms of the body language, I cannot actually add anything to that.

In terms of CABG, we were looking for a 50% reduction in graft failure. We'd already reported that per protocol we had a review of the first 30 subjects which by the time we completed the review we added an additional 17 subjects. We have already now stated we are in the process of conducting a futility analysis really to determine what the best course will be for the Company with regard to that program, both for the Company and also obviously for our patient subjects.

In the antiviral program, we've already reported that we've actually filed pre-INDs for Ebola and also for Marburg. This is a very important program for us and so from that point of view we will actually have an opportunity we believe of pushing this as a partnering priority. There are some very well-established companies now who operate in this government contracting sector and from that point of view I think that is a very important opportunity for the Company.

Finally, before moving to our Q&A I want to return to our acquisition of Ercole and describe some of the benefits of the actions and how they translate into another important discovery and clinical program and obviously ultimately disease application. Those of you that had the chance of actually following through on the Molecular Therapy Web site will have seen that, in fact, we have been able to an influence, that influence of therapeutic outcome in models of inflammation in mice.

These models are very reliant upon the effects of TNF. In one case we are looking at hepatitis and the other case in arthritis. And we are intending now as the next step to go into a monkey study in non-human primates. The important thing also, about that study it is with a locked nucleic acid derivative, which basically AVI-3378 is based on LNA chemistry which is being cross licensed from Santaris Pharma. And so from that point of view it is another opportunity as we diversify the chemistry approaches as well as our biology approaches.

Now we will take questions. I would like to hand this call over to our operator, Julian. Julian, please?

Thank you. We will now take questions from the telephone lines. (OPERATOR INSTRUCTIONS) There will be a brief pause while the participants register for questions. We thank you for your patience. The first question question comes from Yale Jen from Maxim Group. Please go ahead.

Good morning, gentlemen. Thanks for taking the call. First of all I just want to get some of the time lines, maybe you can sort of provide some more details in terms of the, start with the CABG program.

You said you are conducting the futility study right now. When should we anticipate the preliminary outcome and maybe decision making ahead of time?

Thanks, Yale. First of all, as you know a futility analysis has the advantage that it can be conducted without any penalties. It's not an intermediate analysis or interim analysis that one is actually carrying out on the data. The reason for doing it is basically because this trial over the last 12 months has been recruiting for three months and essentially on voluntary recruiting hold for about nine months as we've been trying to understand whatever the DSMB has seen in the first set of data.

First of all there was no safety signals. Secondly, the DSMB did give us clearance to go through to the next protocol level of recruitment for analysis which was up to 120. And specifically recommended as was intended to diversify the number of sites. And in our case this would have been to add on sites which we've already opened up in Poland.

The reason for the futility analysis is just to know why, in fact, the recruitment is taking so long and we want to know whether it's in fact a problem of the way in which the data is being assembled or whether we are actually seeing a signal of lack of efficacy with regard to the drug treated group itself. That's usual a relatively short and fast analysis. It is actively ongoing and so it is something which, in fact, is not going to take more than a few weeks.

It will be very short term and, of course, obviously once we've seen that and the Company's made it's decision then under those circumstances we will actually communicates it. The decision could be, for example, to assume that in fact everything is fine, that the futility analysis if this trends continues, whatever the trend is, it will be unblinded to the DSMB, but not to us. We will still have only blinded data.

If the trend continues and there is a chance of success one clearly would have the opportunity of continuing the study if in fact it does look futile one of the options the Company has is for this first 47 patients is to actually unblind the data, but not to stop the trial simply to actually see what the DSMB see. All of those have very acute short-term things which we intend to look at.

So would that be sort of possible to say that at the end of second quarter maybe third quarter you may have some clues of what the directions might be and that may be the time you communicate to the Street of what the discovery would be?

It's a matter of weeks rather than months, Yale.

So it would be very soon, then, great. The second question comes down to the revenue and expenses. You guided us $16 million to $19 million cash burn for the whole year and when I looked the revenue stream at the moment, would I consider this quarter be a little bit sort of normal as the rest of the quarters or that would be a little bit lumpy moving forward?

Well, there are two things. The first is the acquisition of Ercole has been fully expensed and Alan will comment on that in a second. So from that point of view we will not be making an acquisition every quarter. So certainly that is lumpy.

Secondly, you saw an increase in the range. That was partly due to the fact that we want to make sure that we can bracket our spend and Ercole's spend and also then the spend of the merged Company. Because we will actual will be one Company in one place. But let me actually hand it over to Alan to specifically answer your question.

Thank you.

Yes, Yale, I believe that what you see is, as Les indicated, exclusive of the Ercole acquisition. I think that is, you've seen a very representative quarter of how the rest of the year will unfold. There's going to be some plus or minus in there based upon what particular efforts we have ongoing, specifically as relates to our government contracts.

At certain points we are more focused in internal research with those government contracts. At other points we are more focused on external or partner research in fulfilling those contracts. But generally I think what you are seeing here is a reasonable model for quarters throughout the remainder of the year.

Great. Thanks. And the last question I have is regarding the Ebola and Marburg studies and now you are ready for the IND study in the future. What should I think about the potential partners would be? Was there any sort of, so can you elaborate a little bit more?

Well, I mean certainly in terms of the sector of companies that are being successful and made really quite a good business of partnering in the biological part of government contracting, there are, as you know, both botulinum toxin as well as Anthrax contracts that have actually been awarded and the companies who actually hold those have done very well. You know also that I think by the end of this month there is a new RFP which is out to be finished by the end of this month for the supply of the next generation of the Anthrax contracts.

You saw also that in our press release it wasn't just us, but actually it included a comment from the head of USAMRIID himself. I think this is an opportunity where Ebola and Marburg, but then if you also include Junin and particularly Dengue which are all in the same program, these are all have government contracting opportunities. But if you look also at what else is in that program there is an IL-10 component which looks at the immune response to these viruses.

I think this could either appeal to a company which either is already or has the ambition to become a major government contractor, in other words, will actually pick up a lot of the weight in terms of the commercialization phase as well as the late registration phase of the development of these two compounds. But also there is an opportunity, particularly with regard to Dengue and also control of the immune response, for it to have an appeal to a partner which will either take the whole of that program or indeed focus in on things which in the case of Dengue is much more community acquired than anything which is associated solely with the bioterrorist threat.

Great. Thanks a lot, and I'll get back into the queue.

Thanks, Yale.

Thank you. (OPERATOR INSTRUCTIONS) Next question comes from Ren Benjamin from Rodman & Renshaw. Please go ahead.

Hi, this is actually Elaine on behalf of Ren. Good morning. Thank you for taking my questions.

Good morning.

So my first question is actually a follow-up for Yale's question regarding the CABG program. You mentioned in a couple of weeks you are going to get a sense of what that futility analysis is. Just want to get a clarification. So this analysis will include just the first 47 patients or it's also going to include 30 additional patients?

No, this will be on those first 47 patients. The futility analysis will simply ask if the trend, whatever the trends is, continues, is there a likelihood that this trial could be successful. And so it will be the block of 47 patients that have already been fully assessed by the DSMB.

Okay. But right now the trial continues to enroll patients up to 120. Is that right?

We have clearance to do that and we actually have sites in Poland that are open and so from that point of view you can see that there is obviously a lot of time pressure on us looking at this and making this decision. So even if we can continue you can imagine nobody wants to run a clinical trial where three quarters of the year are actually spent trying to figure out why, in fact, one isn't recruiting as fast as one should be recruiting. So one way or the other this is a very important analysis and decision for us.

Okay. And then the next question is regarding the DMD program. So you mentioned the trial is going to skip to the highest dose cohort. Can you maybe elaborate on what exactly are the reasons for this modification and what signal, what safety signal you see and what efficacy signal you are seeing?

First of all, we've reported that at the lowest dose we had had no significant side events or that would actually cause us any problems. So that clearly is an important observation. It was a trial where in fact the intramuscular injection occurred both into one foot of a young boy and then a control which was saline into the other foot directly into the muscle. We in fact saw no adverse events.

The Medex group then was encouraged to actually go to the highest group and so from that point of view it is an opportunity for us to simply not do that dose escalation. We are also in a situation where the expression that we've seen of this [trophin] is enough to encourage us to go to that level where essentially we will be looking at an order of magnitude increase in the amount of material that will be injected into the patient.

Clearly, though, this is trial where the most interesting observations will be made after systemic exposure. So that also is something that we are pushing very hard.

Just wanted to make sure I understand ut correctly. So by skipping the highest dose it is because you think the lower doses are going to be sufficient for the efficacy, or it's because you speculate high dose might have unfavorable side effects that you don't see at a lower dose?

No, it's exactly the opposite. We are skipping to the highest dose. So we are skipping the intermediate dose and we are going to the highest dose quite simply because the doses that we tested in two patients had no side effects whatsoever of significance.

So under those circumstances we feel safe. Indeed it's the Medex Group themselves feel safe in terms of the risk to the patient of being able to miss out the intermediate dose and go to the highest dose.

I see. Thank you for the clarification.

No, I'm sorry. I'm on a rather old telephone in a hotel in Seattle. I didn't make it back to the Company last night because of the problems of flight operations on the East Coast which is probably why my voice is breaking up a bit.

You're fine. Thank you.

No, thanks.

And then, so I guess this program already treated three patients already, or --?

That's right. We are actually very early obviously in this, but at the same time we've treated enough patients to be able to at least see what the initial profile of adverse events might be.

I see. And when do you. given you are going to skip one dose, when do you think you can sort of announce the data from this trial?

Well, I mean we are work very closely with the Medex Group. It's a trial where the funding for it both comes from ourselves, for example, the supply of drugs as well as from the U.K. Thus far, at least de facto, they've been much faster than we have in getting stuff out onto the Internet. So we certainly going to be working increasingly closely with them and both for finishing this trial and also starting the IV trial.

That's something which we clearly are very much focused on and you know also in terms of our corporate development milestones for AVI-4658 we anticipate dosing the first patient in the systemic study for Exon 51 in the third quarter this year. So these are all near-term events.

Okay. And then regarding your Ebola and Marburg program, I might have missed this, when do you expect to maybe file an IND for those programs?

Good question. Usually, and in this case definitely, the response is always the same. So we filed the pre-IND for both of them. That went in on time. Actually during the first quarter.

We believe that the internal meeting in the FDA may already have happened, but you know that's based on rumors rather than fact. Will you know, I'm sure, also that for pre-IND discussions now, that is conducted solely in writing. The FDA no longer takes face-to-face meetings.

So really the step is under the control of the FDA. But, again, it's a situation where we've already communicated that we are anticipating filing both INDs in the fourth quarter of 2008.

Okay. And then, so also wanted to get a little bit more information about the preclinical study. So in the press release you put out earlier this morning, so how many animals were treated in both studies?

There is a wonderful report of that actually in the paper which is published in "Molecular Therapy" which is part of the nature group. So you're referring to the TNF alpha receptor 2 study?

I'm sorry, actually I'm talking about the Ebola and --

Oh, I'm sorry, okay, yes, okay. I understand. Sorry. I didn't realize you were still on the same topic.

Okay.

We haven't actually disclosed a lot of details around this. And the reason for doing it is that we expect to be publishing this as a scientific paper. And that is something where, in fact, the data that we have is already being assembled specifically for that purpose. As you know, there's a lot of sensitivity about releasing too much data through a press release in advance of publishing it in a peer review journal.

Right.

What we've given is indications of, I think, a fairly remarkable, a remarkable outcome in terms of survival data, both in Ebola and also Marburg. You can imagine also because of the fact that in non-human primates the groups are not large, but because we are part of the government collaborative network with USAMRIID in this regard the whole of the statistical design of those experiments is very much rigorously monitored both by ourselves and also the USAMRIID labs.

I see. And just regarding the potential (inaudible) pathway for both Ebola and Marburg programs, going forward in the program in advance to the clinical stage, do you expect the data require, efficacy data in humans or can you give us some thoughts on that?

So in terms of the ability to get approval under the animal rule particularly for the use of both Ebola and Marburg drug therapies, essentially with fighting personnel, this is not necessarily for a civilian application in times of peace, like for example, it would be with Dengue, I think the expectation is that there would be a necessity to do, for example, a Phase I safety study. Because of the nature of the disease and the infection which is uniformly fatal and not containable outside of A Class IV laboratory it's very unlikely one would every actually have a requirement to conduct those sorts of trials in human patients.

Clearly, it's a situation whereas we signaled in the press release there are places which in fact work on this as an experimental virus study and indeed the genesis of this program was under an emergency IND because there had been what was believed to be a needle stick with an infected syringe. I think the necessity of doing a human study outside of a safety study is very unlikely.

Part of the reason, though, why having an experienced partner on board, it's both for the late clinical development as well as also commercialization. The clinical development part of it, government contracting and the ability to actually work within the regulatory confines of the animal rule, there are companies who have that experience and we don't. That's one of the reasons why we are very anxious and committed to getting a partner.

I see. And since you talked about your partner strategy, can you maybe give us an idea, let's see, besides the virus infection program and what are the other programs you feel as partnerable, or down the road you might also want to look for partners?

The virus program has priority. I think we've communicated that very clearly and I know you are not under any mistake as far as that's concerned. I think the general approach, and indeed part of the reason why when I came on board with AVI I personally felt that my due diligence had turned up a very persuadable result is that these drugs are starting now to take on drug-like character.

The interest in being able to actually direct alternative splicing is something which antisense molecules I believe can do. This is an area where, in fact, the interest created by all the RNAi investments that are being made both in large pharma and also in mid-size pharma I believe that is a partnering opportunity down the road for AVI without any doubt.

I see. And then the last question, regarding your TNF [salsa] program that you acquired from Ercole, maybe can you briefly talk about the progress right now and what will be the next event or next milestones we should look at.

So what we reported and what I already in error started answering in the "Molecular Therapy" paper with studies in mice, basically the next event will be studies in non-human primates. They are already programmed and it's something which we are committed to do.

And also in this case in particular with the sequence that we are working with with the Exon 7 of the TNF alpha receptor, this is the receptor 2, the actual sequence is the same in non-human primates and in humans. Our next step is an efficacy study in a monkeys.

If you can, maybe can you tell us how long does this study going to take and when do you expect maybe an R&D for this program as well?

That is not yet on our corporate time lines but will be, and that is something which once we have all that sewn up, obviously, we will communicate it. I think that must have been your last, last question, do you have a last, last, last question?

No, I'm sorry. That was my last question. Thank you so much for taking the time.

My pleasure.

Thank you. There is a follow-up question from Yale Jen from Maxim Group. Please go ahead.

Hi, thanks for taking my follow-up questions. This is back to the systemic delivery for the DMD program. Could you remind us, two things, you mentioned that the first patient will be dosed third quarter of this year. And first of all do we anticipate any interim data sometime in '09 or are you anticipating sort of a full data set later on afterwards?

This is a situation where we are expecting to go to the U.K. to have a discussion around both the design and indeed obviously to the secure approval for the study. I think we will communicate out the opportunities for data communication in '09 when we've secured that discussion a little more precisely than we have today, Yale. It will be difficult to speculate in advance of the meeting with the European regulatory authorities.

Sure. And can you remind us the overall trial design for this study or is that being reviewed?

Well, again that's something which we have our proposals and clearly it's something which the European authorities may well have their own views on. You will remember from the last call we actually talked about the fact that when we went to them with the initial intramuscular design they asked us at that stage why we weren't going directly to an IV design.

So I think these are areas where, in fact, the European authorities in their thinking are far ahead of what we at least to date have been able to actually garner in terms of our interaction with the FDA. So it's really a very, very important area of discussion both in the United States and in Europe which is very much in flux at the present time.

And the reason for that, of course, is that it's really been a point where the number and types of these trials have been really quite limited simply because nobody has had the therapeutic opportunity to intervene beyond, obviously, the nonsense mutations which as you know is already in the clinic with TCP Pharma.

Correct. And the last question, again, this is the last question, as for the soluble TNF. Let me just ask a contrarian question. Are there any alternative ways to decrease your [decoy] to counter TNF, say compared to differential splicing, and if so, what would be the advantage of differential splicing, (inaudible) differential splicing compared to other alternatives?

That's a very good question. So first of all in terms of will it work and will it show any benefit, the good thing is that we have both with Enbrel, Humira and Remicade, a fairly well laid out pathway full of data for these TNF blockers. You know as well as I do the challenges that they've been facing and it's really the challenges for the administration of a larger amount of exogenous protein.

So the real question here is if you were able to generate, not an exogenous protein, but actually the body's own protein in situ and to do that chronically without these huge peaks and troughs and then at the same time not only do we create the decoy, but we de facto decrease the number of TNF receptors in the liver, what therapeutic benefit does that have?

And you know it's one of those questions which one asks at a stage, is this worth knowing about in clinical trials? And I think the answer is, yes, this is worth knowing about. The question is, what benefit will it show? And I think it's a situation where as this program matures and basically our next step here is to get the full development program laid out for the corporation.

That will be something which will, I think, be extremely informative to us in terms of how we go forward with it. Because the fact of the matter is this is a major opportunity. It's a $10 billion market. It's not something which is on the level, for example, of Duchenne Muscular Dystrophy from a commercial point of view.

Sure, absolutely, and certainly it's a very interesting program and certainly has the potential there. Again, thanks a lot for taking the question and good luck for the other endeavors.

Thanks.

Thank you. The next question comes from Lanny Stout from National Planning Company. Please go ahead.

Hello, this is Lanny.

Good morning.

You are getting ready to do some INDs on Dengue and Ebola and maybe some of the other virus programs, do you have a corporate philosophy on how you are going to fund those? Are you not going to do them unless you have a partner or a contract with a government contracting agency?

And the second question, and it will be my last, can you give us a little idea of what the future contract income is going to be for this year, whether it's either committed contracts currently that you got through the government or, obviously, you won't no about the partnering ones, but this whole idea about what the cash flow comes in in the next three, four quarters?

If we could, let's take it in reverse order because in terms specificity Alan will actually have what we've already communicated in terms of the potential income, and his level of confidence to us to be able to actually collect that, and then I won't forget, I will pick up the partnering question and also the future burn. Go ahead, Alan, please.

Yes, Lanny, the, in terms of contracts we have essentially five contracts. One is a large contract that's a total of $28 million. The other is, the other four are smaller contracts that total up to just above $9 million. We anticipate receiving much or all of those, what remain on those during the current year. So as I was indicating earlier to Yale, this quarter is a, would be a decently indicative quarter of what you'll see for the remainder of the year.

Then in terms of, okay, so what will you do in the future with regard to developing these programs? I think first of all, although I obviously couldn't draw any definitive conclusions from them, the fact that USAMRIID decided not only to allow us to make the press release, but to actually join us in terms of having the Colonel who runs USAMRIID actually be quoted in person, that is fairly unusual and I guess it must signal some degree of excitement in this regard.

I think, secondly, looking at this area of biological or biological space government contracting it was an area which was sort of like a quiet backwater where particularly with regard to Anthrax that being one or two companies that have done this extremely well, I know from my personal competitive intelligence that I've been doing over the last few weeks that with the Anthrax RFP there are about 10 players now in this area.

So it's become a very active area where there are the high degree of professionalism that's actually being built up. I think it's a very interesting program with some very, very groundbreaking results and the question is going to be during this year what's the likelihood of us being able to actually find a partner and actually have a partnership where they could be an opportunity for some partnering associated revenue payments.

And I think it's a situation where I believe it's a very appealing program and this has a very high degree of priority for me. And it's been something where I've actually personally been on the road as well as other members of the team over the last few weeks. That's a lot of focus on this program. It's very exciting work.

Thanks.

Thank you. There are no further questions registered at this time. There is a question registered from Tim Richards, a private investor. Please go ahead.

Yes, this is Tim Richards. What is the current status and approaching milestones for the general manufacturing facility for supporting all these opportunities?

Alan, do you want to pick that up in the detail that we've previously communicated around this?

Yes. We've previously stated that we would be working toward meeting our Phase II requirements in manufacturing during the course of this year. At this time, because of the nature of those trials, we believe that our current in-house manufacturing capability is adequate to meet those needs.

So as we go forward and our clinical path becomes more clear in the specific applications where we are, where we are now conducting trials, then we'll work to expand our capacity likely in Corvallis and/or through the use of outside manufacturing contractors to meet those needs. So we don't see it as a huge hurdle going forward, either from the standpoint of our own manufacturing capability and capacity, or from the standpoint of, on a timely basis, finding outside contract manufacturers to meet the needs that we anticipate.

Tim, specifically, just picking up Alan's point there on the use of the external contract manufacturers you probably know that we already have our subunit supply secured through an external contractor. So that relationship is already in place. The ability to go up to Phase II GMP for the supply of clinical material is important because it obviously gives us a speed advantage.

Once one gets into Phase III and then the go-to-market supply, that is something which philosophically we would, in fact, contract out quite simply because the quantities that one is talking about then really becomes quite, quite astronomic particularly for the sort of opportunity that one is looking at for example with the TNF receptor.

Outstanding. Thank you.

Thank you.

Thank you. There are no further questions registered at this time. I will turn the meeting back over to Dr. Hudson. Please go ahead.

Thanks, Julian. Thanks for joining us and if you heard, you thought you heard airplanes in the background indeed you did. I hope it wasn't actually too incursive. The final thing I would like to communicate, obviously, although we are early on in many of these programs one of the things as a corporation that it struck us is that sometimes the depth of what we have to communicate gets lost on these rather brief interactions.

We are intending to have a Science Day in New York City probably around the 10th of September and we are in the process of finalizing the contract around that and so we will make an announcement. And our intention there is really to give people who are interested parties the opportunity to see the depth of what we have in our cupboard here from an R&D point of view.

And so it will be, in fact, where our scientific strengths have a chance to shine through. That's particularly important for a Company that has become so intensely product focused. These updates will continue to be focused around corporate priorities and also our product candidates that are in the clinic. I thank you all very much indeed for your time and look forward to the next time we have a chance of interacting through one of these calls.

Thank you very much indeed. Good bye.

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