Sarepta Therapeutics Inc (SRPT) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 AVI BioPharma Incorporated Earnings Conference Call.

My name is Tahisha and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session.

(Operator Instructions)

As a reminder, this call is being record for replay purposes. I would now like to turn the conference over to your host for today, Mr. [Brian King], Corporate Counsel. Please proceed.

Thank you, operator. Thank you for joining today's call. Earlier today we released our financial results for the second quarter of 2011. The news release is available on our website at ww.AVIbio.com. Our 10Q will be filed no later than august 9th.

Joining me on the call are Chris Garabedian, our President and Chief Executive Officer and Melinda Miles, our Corporate Controller.

First, I need to inform you that during this call we will make a number of statements that are forward looking, including statements about the development and clinical status of AVI's product candidates and their potential efficacy, clinical results, revenues, expenses, potential funding from the government and other sources and collaboration and partnering opportunities.

These forward looking statements involve risks and uncertainties, many of which are beyond AVI's control. Any of such risks could materially and adversely affect our business, results of operation and the trading price of AVI's common stock.

For a detailed description of risks and uncertainties we face, you are encouraged to review the official corporate documents filed with the Securities and Exchange Commission.

With that said, let me turn the call over to Chris Garabedian. Chris?

Thank you, Brian. Good afternoon, everyone, thank you for joining us. I'm pleased to provide you and update and overview of our activities and accomplishments since our last quarterly update. Since our last earnings call we have realized achievements across the organization and have seen progress across all of our clinical programs and our early research efforts. Specifically, we have initiated enrollment in our Phase II study with Eteplirsen for Duchenne muscular dystrophy and are on track to begin dosing later this month.

This double blind, randomized placebo controlled study will provide important information to inform our pivotal study design and will enhance our understanding of the clinical benefit of Eteplirsen by exploring higher doses for a longer duration of treatment than has previously been studied, while also providing comparative data to an untreated patient population.

With respect to our infectious disease programs, we currently have three clinical candidates in Phase I safety studies. Our Ebola and Marburg drugs have completed half of the six dosing cohorts with no safety concerns raised by the DSMB at this stage.

Additionally, our influenza drug has com9plted the first dose cohort and is awaiting an upcoming DSMB review.

Regarding our influenza drug, we submitted a response to a request for proposal or RFP by the joint project manager transformational medical technology of the defense treat reduction agency in June and we're awaiting a potential contract award later this year. I'll provide more details on the status of this RFP response in a moment.

We have also advanced some of our early research efforts to expand the utility of our PMO chemistries, including initiating activities to identify lead candidates for other exon-skipping drugs for DMD.

On the corporate front, we are entering the second half of 2011 with a strong balance sheet with 54.2 million in cash. We are also confirming our guidance of 50 to 60 million in revenues and increasing our guidance on net cash expenditures to 28 to 33 million from a previously guided range of 23 to 28 million.

I'll provide more details on the drivers of these increased expenditures in a moment.

I'd like to now to address each of these achievements in greater detail. First let me provide an update on our DMD program. As previously announced in an 8K filed on July 6th we received approval from the IRB at Nationwide Children's Hospital in Columbus Ohio to initiate our Phase II placebo control trial of Eteplirsen.

As we've reported previously, this is a 12 patient study evaluating once weekly infusions of 30 milligrams per kilogram of Eteplirsen, 50 milligrams per kilogram of Eteplirsen or placebo over a period of six months. We have designed this study to evaluate improvements in biochemical biopsy markers of efficacy and will be collecting a series of end points to determine the potential effect on clinical outcomes such as walking tests and tests of muscle strength and function.

This is a double blind, randomized placebo controlled study which will be more meaningful to the FDA and other global regulatory authorities and will help us guide our pivotal study as well as provide supported data for the potential registration approval of Eteplirsen. Enrollment is well underway, pretreatment baseline measures are being gathered and we expect dosing to begin later this month, with study results anticipated mid next year or around the end of the second quarter of 2012.

Additionally, we have received feedback from the FDA to support extended dosing in this study. Assuming no safety or efficacy issues emerge in the first 24 weeks. This will allow us to enhance the long term treatment data set and capture safety and efficacy data beyond 24 weeks, prior to finalizing the design of our pivotal study. This will be coupled with the expected rollover of placebo patients to study drugs after the 24 weeks, again, assuming no unforeseen safety or efficacy issues emerge.

Also, the lancet recently published clinical data from our phase 1B2 study of Eteplirsen. These data demonstrated Eteplirsen potential disease modifying properties. We believe this publication supports our decision to acceleration the development of Eteplirsen. One of the key highlights of this study was the markers of inflammation in the muscle biopsies. We showed a statically significant reduction in CD3 cells in the 10 mg and 20 mg per kg cohorts and a similar trend in CD4 and CD8 cells.

This underscores our belief that the restoration of dystrophin that we saw in these patients appeared to have an impact on reducing the immune inflammatory response that is the sequelae of disease muscle tissue. The fact that this response was observed in as little as 12 weeks of dosing, even in patients with more modest increases in dystrophin and at lower doses than we're studying our current Phase II study bolsters our confidence in our ability to show a possible treatment effect with Eteplirsen.

Based on these encouraging results with Eteplirsen, which is a drug targeting exon-51 and related to our broader DMD strategy, we have initiated a program to begin screening lead sequences for additional exon with the goal of bringing more exon-skipping drugs into the clinic for DMD.

An effort is under way to identify lead drug candidates targeting exons for some of the other more common mutations, deletions that are found in the DMD population. These efforts are being undertaken to enable AVI to bring other exon-skipping drugs into the clinic and will be a critical step in shaping a development plan designed with the goal of obtaining regulatory approval for multiple exon-skipping drugs or optimally a pan exon class approval.

To help us with this broader clinical development program and as we announced this past quarter, we have hired Ed Kaye as our Chief Medical Officer. Ed is a recognized industry leader in the development of therapeutics for the treatment of rare genetic diseases and pediatric neurological diseases. Most recently leading Genzyme's clinical development program across their rare genetic disease, (lysosomal) storage, and neuro degenerative disease programs.

Ed has helped to establish a footprint for AVI in the Cambridge Massachusetts area, an important hub for industry talent in the rare disease and genetic medicine sectors.

Now, I'll focus on our infectious disease programs.

On the Ebola and Marburg front, the Phase I safety studies continue to progress and we are now halfway through our six dosing cohorts. Each drug has completed the first three dosing cohorts and had been studied at doses up to one mgs per kg and we just received noticed from the data safety monitoring board today that we can proceed with our Marburg drug to the next cohort of three mgs per kg. We have an upcoming DSMB review for our Ebola drug to do the same. As a reminder, these dosing studies are designed to go up to nine mgs per kg.

We also recently had a productive meeting with the FDA regarding the animal roll regulatory approval pathway and now have better guidance on the required proof of efficacy and safety for these programs. We expect to complete all of the dosing cohorts around year end and expect to have data ready for release in the first quarter of next year.

As I mentioned at the beginning of the call, we initiated our third clinical trial of 2011 with our influenza drug candidate AVI-7100 in this past quarter. This drug candidate created with another variation of our PMO plus technology underscores the broad application of our technology in the infectious disease space. Like our other Phase I safety studies with Ebola and Marburg, the primary goal of this study is to determine the tolerability and pharmacokinetics of the compound in healthy volunteers. The study is a randomized, double blind, placebo controlled trial and involves administration of AVI-7100 via intravenous infusion in a single ascending doses in up to 48 healthy adult volunteers. The study will have six cohorts consisting of six volunteers and two placebos -- I'm sorry, six volunteers who will receive the therapeutic and tow who will receive placebo.

We also recently responded to an RFP announced in May by the joint project manager of transformational medical technologies, seeking the full clinical development of our influenza drug candidate. Based on a revision during the RFP response period to the original RFP that was posted, applicants were required to submit separate proposals for treatment and prophylaxis if they wanted to be considered for both of these indications.

Recently, we received notice from the DOD that our proposal for post exposure prophylaxis met the technical requirements for acceptance and will be considered for a contract award. However, our proposal for post symptomatic treatment did not meet all of the technical requirements for acceptance and was removed from further consideration.

While we are disappointed that our post symptomatic treatment proposal will not be considered for a contract award, we are pleased that our post exposure prophylaxis data in animals was sufficient for potential RFP acceptance and are hopeful of our chances to get a contract award later this year.

Importantly, our prophylaxis proposal was the larger of the two proposals and if a contract is awarded as we submitted, it would represent our largest single contract to date. Furthermore, we believe a prophylaxis indication is a more important application for stockpiling reserves.

We are not currently abandoning our clinical development efforts that are underway with AVI-7100 and intend to explore other options for securing support to pursue a program for post symptomatic treatment. Whether through government agencies or commercial partners.

We are also continuing to perform well in rapid response exercises conducted by the JPMTMT. In the second quarter, we along with our collaborators at the naval medical research center successfully completed a rapid response exercise against undisclosed viral and bacterial threats. This exercise represents the first time that we completed a rapid response exercise against the bacterial threat, as well as the first time that two threats were addressed at once.

The key outcome of this rapid response exercise was our conception, design, and manufacture of two novel RNA based drug candidates against these threats in only 18 days based on our proprietary PMO plus technology.

Also, we are in discussions for collaboration with the defense threat reduction agency and the naval medical research center to begin exploratory work on bacterial targets including resistant bacteria such as the Ecoli strain in the news recently.

Additionally, related to our infectious disease and biodefense applications, we recently began discussions with NIAID, that's the National Institute for Allergy and Infectious Disease, an affiliate of the NIH, where we are discussing a collaborative relationship that would investigate the antiviral capabilities of our product candidates against the [denangue] virus.

We are pleased that other government of agencies beyond the Department of Defense recognize the potential utility of our platform technology and we view this as another validation of the promise of our drug chemistry.

On the corporate development front, we continue to execute on our government sponsored contracts for Ebola and Marburg, which is a large driver of another strong quarter of revenues, our balance sheet also remains strong with approximately 54.2 million in cash as of June 30th, 2011.

And looking ahead to the rest of 2011 we have ambitious but achievable goals to move our programs forward, including the completion of enrollment of initial dosing of our Phase II trial in Eteplirsen, continued NDA enabling activity for our DMD program and continued execution of our government sponsored contracts.

We also expect to hear from the DOD in the fourth quarter regarding whether our prophylaxis proposal will receive a contract award.

Before we move to a review of our financials, let me mention that Dave Boyle, our former CFO departed the company at the end of July and has been previously -- as has been previously announced in SEC filings. We have an active search underway for a new CFO. As a public company, the SEC requires the identification of both a principal financial officer and a principal accounting officer. When we identify our new CFO that individual will assume these titles, but in the interim, I will be assuming the role of principal financial officer and Melinda Miles will assume the role of principal accounting officer.

I mentioned earlier that we have updated our 2011 financial guidance as was also outlined in our earnings release issued earlier today.

Our revenue guidance remains unchanged and we anticipate revenue of approximately 50 to 60 million. We expect our cash expenditures for operations, net of government funding and other collaborative efforts to be 28 to 33 million. This increase to our previously provided guidance is the result of several factors, including higher manufacturing scale up costs to support an accelerated path of development for Eteplirsen and our broader DMD program.

Although we had a good understanding of the overall costs associated with preparing for drug supplies for our DMD program, we had previously expected more of these costs to be incurred in 2012. We are on track with our process improvements and our CNC scale up efforts and will simply be incurring more expenses in 2011 than we had previously anticipated.

Also the development costs related to the Phase I safety study for AVI-7100 are not receiving government support and we are paying for this study out of our discretionary dollars, whereas a portion of these costs were previously expected to be reimbursed under our flu contract that ended in early June.

Additionally, we have incurred costs associated with various executive departures and hires, including the realization of one time severance bonuses that were contractually obligated as part of employment and separation agreements.

Lastly, we anticipate some increased costs related to the initiation of research activities to support additional exon-skipping drugs for DMD along with some additional research to advance chemistry efforts in an effort to produce data better to support business development activities.

I'd now like to turn the call over to Melinda Miles, our corporate controller and principal accounting officer who will now review the financial results for the quarter.

Thanks, Chris. In the second quarter of 2011 AVI reported an operating loss of $10.1 million, compared with an operating loss of $7.7 million in the second quarter of 2010. The increase in the operating loss was primarily the result of increased second quarter research and development expenses of $10.9 million, offset by increased revenue of $7.6 million and a $0.7 million decrease in general and administrative expenses.

Research and development expenses were $17.8 million in the second quarter of 2011, compared to $6.9 million in the second quarter of 2010. An increase of $10.9 million.

Research and development expenses increased primarily as a result of higher costs associated with (inaudible) covenant contract and increased research and development costs for AVI's Duchenne muscular dystrophy or DMD development program.

General and administrative expenses in the second quarter of 2011 were $4 million compared to $4.7 million in the second quarter of 2010. A decrease of $0.7 million. The decrease in the general and administrative expenses was the result of a $2.6 million decrease in severance related for the former Chief Executive officer that we incurred in the second quarter of 2010 but that we did not continue to incur in the second quarter of 2011.

This decrease was partially offset by an increase in salaries, severance and employee related costs from our increased staff, higher costs for professional and legal services and increased costs for facilities.

Revenues for the second quarter of 2011 increased to $11.6 million from $4 million in the second quarter of 2010. Again, as a result of increased revenue associated with this July 210 Ebola and [Marburg] government contract.

In the first half of 2011 the operating loss was $15.7 million, compared with an operating loss of $15.7 million compared with an operating loss of $15.4 million in the first half of 2010.

The increase in the operating loss was the result of higher costs or research and development of $19.6 million and increased general and administrative costs of $1.4 million offset by increased revenue of $20.7 million.

Research and development expenses were $32.6 million in the first half of 2011 compared to $13 million in the first half of 210, an increase of $19.6 million. This increase was due primarily to an increase in spending related to the July 2010 Ebola and Marburg government contracts, an increased in DMD related program costs and increased spending for the H1N1 contract and other research costs that were partially offset by an increase in spending on AVI's 2011 government contract.

General and administrative expenses in the first half of 2011 were $9 million compared to $7.6 million in the first half of 2010, an increase of $1.4 million. The increase is primarily due to an increase in salaries, severance and employee related costs from incurring staff, prior costs for professional and legal service and increased costs for facilities. The increase in G&A costs were partially offset by severance related costs for the former chief executive officer that we incurred in the second quarter of 2010, but that we did not continue to incur in the second quarter of 2011.

Revenue for the first half of 20111 increased to $25.9 million from $5.2 million in the first half of 2010, primarily as a result of increased revenues associated with the July 2010 Ebola and Marburg government contract.

The net income for the second quarter of 2011 was $1.3 million, or one penny per share, compared to a net loss of the second quarter of 2010 of $16.7 million or a loss of $0.15 per share.

The $18 million increase was primarily due to a change in the valuation of certain warrants, partially offset by an increase in operating loss.

The net income for the first half of 2011 was $3.1 million or $0.03 per share, compared to the net loss for the first half of 2010 of $17.2 million or $0.16 per share loss. The $20.3 million increase was primarily due to the change in the valuation of certain warrants.

In connection with equity financing prior to 2011, AVI issued warrants that are classified as liabilities and are adjusted to fair value on a quarterly basis, impacting our net income or loss. The amount of warrant liability is primarily affected by changes in AVI stock price during each financial reporting period, which causes the warrant liability to fluctuate as the market price of AVI stock fluctuates.

In the second quarter of 2011, the warrant valuations decreased by $11.2 million, compared to an increase in the warrant valuation of $9 million in the second quarter of 2010.

In the first half of 2011 the warrant valuation decreased by $18.5 million, compared to an increase in the warrant valuation of $1.9 million in the first half of 2010.

AVI had cash and cash equivalents of $54.2 million as of June 30th, 2011, an increase of $20.6 million from December 31st, 2010. This increase was due primarily to the cash raised in the April 2011 equity financing which raised net proceeds of approximately $3.21 million.

In addition, the proceeds from the exercise of warrants and stock options was $0.2 million and was partially offset by cash used in operations during the first half of 2011 of $10.5 million and cash used for property equipments and patent related costs of approximately $1.2 million.

In April 2011, AVI sold 23 million shares of its common stock at a price of $1.50 per share in an overing registered under the Securities Act. I do want to point out to everyone that this previous discussion regarding warrants does not relate to this offering, as no warrants were issued during this recently completed offering.

Also importantly, accounts receivable increased by $7.7 million to $10.9 million and accounts payable also increased $9.7 million to $11 million. Both of these increases are the result of an increased revenue and activities related to the Ebola markers and H1N1 contracts.

Chris has already spoken about our guidance, I would like to reiterate for 2011 AVI confirms this guidance for revenue of approximately $50 million to $60 million, the guidance for projected cash expenditure for operations net of government funding and other collaborative efforts has been adjusted to a range of $28 million to $33 million, and increased from previously provided guidance of $23 million to $28 million.

AVI believes it will continue to receive funding from government contracts and has assumed certain revenue from these awards in providing this guidance. If AVI does not [continue] to receive this funding from its current contracts, this guidance may change.

And now, back to you, Chris.

Thank you, Melinda. Operator, I'd now like to open the call to questions.

(Operator instructions). Your first question comes from the line of Reni Benjamin from Rodman. Please proceed.

Hi, good afternoon and thanks for taking the questions. Just a couple of them, I guess starting off with the DMD trial, Chris, you went through the design of the trial, our mentioned that its a 12 patient study, but can you just give the break down here? How many are in placebo, how many are in treatment and for each of the dosing arms?

Sure, there are four patients in each arm set, four are going to receive the 30 mg per kg dose. Four will receive the 50 mg per kg dose and four will be a placebo. The placebo patients will be further randomized because the biopsies are taking place at a different time point for the treated arms. So we're taking those four patients and three will be two that are on placebo that received a biopsy at 12 weeks and baseline and tow that receive a biopsy at 24 weeks and baseline so we can maintain the blind for each of these specific treatment arms independently.

And how many biopsies are the treatment arm getting?

Yes, so the 30 mg per kg dose will get a biopsy at baseline, pretreatment and 12 -- I'm sorry 24 weeks.

And the 50 mg per kg will get a baseline biopsy pretreatment and 12 weeks. We did that because we wanted to better understand the relationship of dose and duration and I've stated this before is that we wanted to compare the 50 mg per kg cohort to the previous 12 week study where we had six different dose cohorts, but importantly, we wanted to understand if longer duration of dosing with a loser dose, be it 30 mgs per kg gets you to the same dystrophin production as larger doses over a short period of time. So, we think this design gives us the most information about dystrophin and how quickly you might achieve a steady state that's related to the dose that's used.

Okay. And you'd mentioned in your prepared remarks some results using immunological markers like CD3 positives, cells and C4 and I believe CDA. But can you just talk to us a little bit about the rationale as to why those cells in any way would predict a clinical benefit?

Yes so we know that the etiology of this disease manifests itself with an immune inflammatory response as a result of the lack of dystrophin, so -- and we see this -- some papers suggest this happens early on in the disease progression in even younger boys, and so we know from just general DMD research that the lack of dystrophin will lead to inflammation of the muscle tissue that leads to fibrosis that is kind of a negative cycle that limits the ambulation and adds to the progressive nature of the disease. So we think that it's a good marker to associate if we're creating healthier muscle tissue. If we're quelling that immune inflammatory response by restoring dystrophin.

The reason we were encouraged by it is that we don't suggest that we have any direct anti inflammatory effect with our chemistry. So this would merely be the result of restoring dystrophin into the muscles which is creating an even more robust response in reducing the inflammatory infiltrate.

Okay.

So again, it was just an encouraging sign in a short period of time that leads us to believe that if we have higher doses over longer periods of time that again we should even see healthier muscle tissue via biopsy.

Okay. And then just one final question regarding your FDA discussions and the animal rule. You mentioned that you had had discussions, but what was the outcome of those discussion, has -- what can we expect sort of going forward?

This is what is common place with any clinical program, is to gain feedback from the FDA along the way. Now, for clinical drug candidates, there's a lot of experience and people understand exactly what's expected and required for clinical programs, generally speaking. With an animal rule, particularly for a drug that is not currently approved, so this is not taking Cipro that's already approved and trying to get an anthrax indication, we're taking a novel drug chemistry -- novel mechanism of action and trying to get an FDA licensure off of an animal rule program.

And so, even the FDA has not really gone down this path. So this was an important meeting for us to gain kind of a meeting of the minds and we're not disclosing the specifics of those meetings and these will result in ongoing discussion and dialogue but we were very encouraged by the meeting because we got clarity from what their expectations are. There were no big surprises there, but again, any time we have discussions with the FDA where we can better understand their expectations, it mitigates the risk of our program and makes us more assured that we're taking the right path forward.

So I just highlighted that because its an important touch point for us to get FDA feedback and we're very pleased to have gotten that and now have a better understanding of that expectation. But it does not change any previous expectations or guidance around those programs. It just give just more clarity of those expectations.

So there's no additional necessarily experiments that need to be done -- do we have a sense as to when maybe a filing under the animal rule will occur?

Yes, we -- so right now these government programs are tranched in various modules, right? and so we're in what we refer to as clin one, this is the vernacular used by the government and all the feedback we got from the FDA would not change what we're doing and what we're expected to perform on clin one. All of the discussions related to the subsequent kind of clinical modules, clins two through six.

And so again, at this point, we're still evaluating the feedback and determining what that program would look like. But at this time, we don't think it would significantly alter the timing of these studies or the approval path, but we have not given specific guidance on when that would occur, an FDA licensure or an NDA filing. Once we have a better idea of that, moving forward we'll provide that. But at this time, we're just taking each nodule and part of the program at a time.

And just one final question, partnership talks I know in the past that we've at least asked you this, but can you give us any sort of a sense as to whether any are progressing, it's kind of on hold, waiting for the Phase II to complete, how are you thinking about a potential partner.

Yes so I'll just -- so with DMD -- I assume you're referring to DMD and I'll briefly mention on other programs, but on DMD we've said pretty clearly from the beginning of the year that we're focused on moving this program forward on a critical path and doing everything we can to make sure we're moving steadily into a pivotal study that we hope to get into by the end of next year and we know an important value inflection for that program will be turning the card over on our Phase II study that I described mid next year.

Now, that's not stopping us from having conversations and dialogues with companies. And we've in fact gotten some interest and we have had communications and unless there's a company who's willing to bring an economic package to the table, or even one that is milestone driven upon success of Phase II, we are comfortable moving this program forward on our own. But many of our partners also would like to wait and see the results of this Phase II program.

So again, we're in what I would consider, informal dialogue with several companies around our DMD program. But this is something we're not expecting an imminent deal for DMD soon and it really depends if any of these patterns step up and bring the economics that we're looking for this type of a partnership.

The only other thing I would add is that we would like to retain at the very least, US commercial rights, and so most of the discussions we would have are around an ex US or territory rights deal around DMD.

We also continue to have dialogue around our platform technology and where that can go with other therapeutic areas. We had a presence at bio this past summer and we initiated a lot of dialogue with companies and these have varying cycle times and there's different priorities and these companies that we're talking to have a lot of other priorities as well.

So, again, we're in constant dialogue, but I have no further guidance at this time related to other business development.

Thank you for taking the questions.

Thanks, Reni.

Your next question comes from the line of Yale Jen from Maxim Group. Please proceed.

Thanks for taking the questions.

Thanks, Yale.

Just the two main questions here. The first one is for the RFP for the influenza, you mentioned that this could be if you received it will be the largest among all. Would you give us some sense of the scope of that, if you see it right now and any insight on that as well?

Yes, I've communicated this by example previously and I'll say it again. so the animal rule NDA contract awards that we receive for Ebola and Marburg were each about 150 million and so the way I like to describe it is that with an influenza NDA program, whether it be treatment or prophylaxis, this would involve clinical studies with patients and those patients would likely come from around the globe and so a much more sophisticated clinical program that would be north of what you would expect of an animal rule NDA. Okay?

I suggested that it could be double that or more but I think we like to describe it as in the range of hundreds of millions of dollars, but I think I stopped short of saying something that would be in the $500 million range.

So I think again, several hundred million dollars is what we're comfortable with and north of the animal rule NDA contract awards that we've received previously.

Great. Thanks. That's very helpful. The second question is that you guided that you would provide the result for the Phase II study, second quarter of next year. I remember earlier in some other -- in earlier format that's also you would have provide the biopsy other results a little bit earlier so there's two sets of data presentation. Are these two combined to a one data presentation or release in the second quarter of next year? Is that a go any specifics of that data sort of content nature you can sort of give some colors for that?

Sure, yes. So yes, so you're referring to the 50 milligram per kilogram biopsy data and what we're doing right now is trying to determine the level of information that we'll be able to share and the timing of that. So we -- and that's why we didn't give specific guidance on that data point but we are evaluating this -- basically we have a placebo controlled study and its blinded and so we want to make sure that we do not break the blind by sharing data early, before the final results are due.

And we think we can achieve that and I would say if we can achieve that then we'll know the level of inflation we can share, and the timing, but that would likely come toward the end of the first quarter of next year, but we're just clarifying the nature of the data we can share without breaking the blind and the fact that we don't want to compromise the integrity of the data analysis or how the FDA would view this placebo controlled study, should we take it to the FDA at an end of Phase II meeting, we want to a) make sure its supportive of a broader clinical program, and very optimistically would they consider it robust enough to consider for sub part H accelerated approval.

So again, we're just trying to insure that we can do what we say we're going to do and look forward to further communication around the timing and the level of data we can share prior to the middle of next year full results.

So possibly you could have data release before the second quarter of next year with portion of the data, you think it's appropriate, but definitely you will have the data release in second quarter of next year that will be more comprehensive if you don't have the first data release. Would that be fair? Characterize that?

Yes, that sounds fair.

Yes, we could have data as early as the end of the first quarter and we expect a full data release at the end of the second quarter, that's correct.

Okay great. That's very helpful. And thanks for taking the questions.

(Operator instructions)

Okay, operator --

My apologies.

Okay, go ahead.

(Operator instructions). Your next question comes from the line of Mr. Kevin McCarthy, he's a private investor. Please proceed.

Hi, Chris. Thanks for taking my call. Couple questions about DMD. Couple of disconnects I guess in our group's mind here, it seems that the data especially with what the Lancet came out with and it seems consistent with what we've been led to believe, seems very favorable.

Minimally strongly competing with Glaxo Smith Kline [procenza] things, although they're much further ahead here. Kind of curious when none of the charitable DMD groups haven't stepped forward to help AVI with their trials financially.

Yes actually -- so AVI's received a lot of grant money in the past from various organizations. So this year we have engaged many of the advocacy groups in extensive dialogue around our program and our interest in gaining support and financial and otherwise to support our overall program. We're still in active discussions. There are varying sizes of these organizations and each of them have different cycle times. We have large organizations like the Muscular Dystrophy Association or AFM similar organization based in France who has -- they have 10s of millions of dollars in their budget versus smaller budgets for many of the other advocacy organizations.

We -- again, until we're ready to announce something you'll hear more about that. But I can just tell you that we have constant communication with all of them. We're always telling them about our programs and the need for further support and we are engaged in full discussions with all of them and we're encouraged that we will have non-dilutive funding coming from these organizations. Each of them have a different expectation of what's attached to the dollars that are handed to AVI, and so some of that requires some negotiation.

Some of them want this tranched out into small pieces and if we're looking for larger grants that can take a longer amount of time. But rest assured, I mean we are actively engaged with all of the major organizations and have asked most of them for support on our programs that are in various stages of negotiation of that.

Thank you. another question or point here, just real quickly, I don't want to take your time, but our group try to looks for win wins, and because of DMD and Ebola and that here's a company that may have the chemistry to help these people and so we invest as such hoping you get the win win, you help people and you also kind of profit from it and maybe you can spread those dollars somewhere else. But we kind of have a concern, especially when you said that you want to retain the US rights with DMD and I'm trying understand not just how we're capitalized right now but where we're going with this, obviously there's a bit of a lid or an anchor on here with the last funding that happened and then the -- now there's another 100 million shares authorized here. Are you thinking that potentially net year's DMD Phase II large trial that you may go ahead and fund it through these shares?

In other words are we -- should we be anticipating a lot more dilution here and probably that would be followed by a reverse split and things like that and I don't want to focus too much on the short term here, but I've seen this path before with biotech stocks obviously and it's a concern.

In the protect world what our group would love to hear is that you're going to have a partner that's going to fund these trials, you get a big upfront, we don't have to go to the capital markets anymore, or at least not in the next year or two, but we have this concern because we've invested in its for two reasons, once again, there seems to be kind of a benevolent side of this at least in our minds or hearts, but also its an investment for us.

And trying to understand the mindset here I guess if there's a side of us that says if you can't get a partner for DMD you stop the program. The other side of us is of course these kids and that. And I was kind of hoping that you could -- I know it's a tough question, you probably didn't want to hear this one, but what are your thoughts on this because we've been here since there were 30 million shares and now god sake with warrants and that out, there's probably 180 million, you have another 20 from the original authorization, another 100 million now available --

Kevin, Kevin, Kevin let me stop --

Yes.

Because I'm sorry, you've taken a lot of time on the call. So I hear your question, it's very simple for me, oaky, yes we all want to see this product move forward and help the kids, regardless of who's paying for that. For me it's about creating shareholder value and driving value for this company on this program. We have a very exciting product that we think can be one of the most successful programs in this space and we think the business model of a rare disease is very well proven with Genzyme, with Shire, with BioMarin, with [Alexion].

Let me remind you, Alexion took a product across the finish line without a partner, on their own, and are driving the sixth largest market cap bio tech in the industry with about a $9 billion market cap even after today's sell off.

So for me, it's very simple. we are talking to a lot of partners but I'm not going to -- if you can imagine the partners mindset, they're going to argue that we have a Phase I B2 product that doesn't really have a compelling proof of concept and that might be worth name your number, 10 million upfront? Which might buy us another quarter or two if we're lucky and we've -- in the in test of that, we've given up all of our worldwide rights of a value program that could drive billions in market cap.

So if somebody comes with what I think you're thinking about, which is 50 million up front and milestones in the hundreds of millions and a nice double digit royalty in the high teens, early 20s, low 20s to reflect the true value of this program, that will be seriously considered as part of that process.

So where I sit the question is how much value destruction occurs with a bad partnership versus how much value destruction occurs with trying to find other sources of funding. And so that's a trade off its economic. It's not about helping the boys, we all want to do that. If another company can help us do the boys without destroying shareholder value we will do that. But it's all about that trade off of what's the best way to drive shareholder value.

The other thing I'd say, if we find a partner, oftentimes we're beholden to that partner of their priorities. Are they going to delay the program? Are they going to cancel the program? Where does that leave our shareholders if we're putting all of that in somebody else's hands? It's possible that they may not have the same level of attention that we're going to; it's why we hired Ed Kaye from Genzyme.

We're building a team that knows not only how to do drug devilment but knows how to do it better than big pharma. So that's where also when we're going you to get advocacy dollars to help us with the program, if we've got a partner that has billions on the balance sheet, we're going to be less effective in getting non dilutive capital.

So the questions is a good one. The answers are not as simple as it would seem. And this has a lot to do with what the markets are looking like.

On a day like today, I'm very concerned about trying to raise money with our -- with issuing more shares. So, don't mistake the general course of business to make sure we have enough authorized shares to keep continuity of business. I don't know where people are getting the reverse split question. We have not talked about this, we have not said anything and people speculate about a lot of different things. So I'd just say we're going to continue to operate the business the way we best see fit to create value for shareholders of the company.

Thanks, Chris, that's a great answer. And today is a bad day to be holding a conference call. But one other thing is there any opportunities with influenza for partnership or I mean is that still yet another situation where we need to get a little more data and move it a little further along to have maybe a little more leverage. And that's my last question.

Yes, that's fine and if you heard the commentary on my script here, we indicated that we would continue to pursue influenza, even though we are not qualified for a treatment NDA via the Department of Defense. So I mentioned in my notes that we would consider other government agency support or commercial support of moving the influenza treatment forward.

So again, that news came this week and was just announced on this call. So we will begin to look for other ways to explore the influenza program in support of a treatment NDA. We're still hopeful that we'll get a prophylaxis NDA by year end. But thanks, Kevin, for your interest and I think that's the last caller, operator, is that right?

Yes, sir. It is.

Okay, so let me just make some closing remarks. Everyone here at AVI is excited about the progress at the company. We've realized significant achievements in the first half of 2011 and we have ambitious achievable goals for the remainder of the year. We look forward to reporting on our progress at upcoming conferences and the next quarterly call and thank you all for joining us today.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.