Valneva SE (VALN) 2009 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Intercell Fourth Quarter and Preliminary Full Year 2009 Financial Results Conference Call. I am the operator for this conference. Please note that for the duration of the presentation, all participants will be in listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. (Operator Instructions).

At this time I would like to turn the conference over to Gerd Zettlmeissl, CEO. Please go ahead, sir.

Good morning to everybody who is listening from the United States, and good afternoon to everybody in Europe. Welcome to the Intercell Q4 results call we have today. I am here almost as usual with my management board colleagues, Thomas Lingelbach and Reinhard Kandera, our CFO, who both will speak later in their respective sections. We will have planned that we go first through a couple of highlights for 2009 and also some news around the 2010 timeframe. Then Reinhard will take over for the financial performance report and later on Thomas will speak about our Japanese Encephalitis marketed program and our clinical programs. And last but not least we have outlook and also question and answer session.

Let's directly move to page four in the presentation now. Before we start to talk about the different projects and highlights, maybe a few strategic considerations. As you know, Intercell has been driven all over the last years by its strong performance in developing strong and solid pipeline. I think we have achieved this over the last couple of years very much. We certainly have one of the most delivering pipelines in the vaccine industry today, and we have also shown that we move programs forwards from one clinical step to the other. We made really more than usual new stage entries over the last couple of years, more than anybody else in the vaccine industry. And from that we really try to build our company now very strongly forward.

On page four you see that we have successfully approved and launched a product in the year 2009. We have done this in all relevant traveler markets for our Japanese Encephalitis vaccine. Again this is a great success for the company and we are very happy that we could achieve this really in parallel in all major territories. It not only shows you our development and regulatory capabilities, but also it shows you that with the product now in the market we have a nice move to revenues going forward, and we have not changed and will not change our expectations we have for the sales of our Japanese Encephalitis product. We always said that we would like to reach total market potential around about EUR300m in the next five to 10 years. All the indicators we have today point in this direction.

We had some launches which were very successful in countries. We have still launches to do in different other countries. Thomas will come back at the later stage of the presentation to add more details.

We have also started our Phase III study for the pediatric label for travelers. You might have seen in the report that we face some delay for our respective trials in India through regulatory changes we had in the country. Again we will say a few words about this later.

Page five, I just would like to remind you that by the end of last year we made another breakthrough partnership with a major vaccine (inaudible) early stage and developing company, namely GSK. Let me say another, please be reminded that we made one already with Novartis in 2007, which both together today can be seen really as the major partnerships which have been done between biotech and (technical difficulty) of vaccines.

The focus of this partnership really on acceleration of commercialization and development of our patch based vaccine, putting our travelers' diarrhea vaccine now in Phase III, our Pandemic flu program, we are running with the American health authorities, and last but not least, also broadening the use of the patch in other indications.

There were significant financial contributions to Intercell and there most importantly will be very significant contribution to Intercell out of this partnership.

On page six, just to highlight a few points in the next couple of pages around our development pipeline. Has started last year, our Phase III clinical trial for the traveler diarrhea vaccine patch. In addition has started the Phase II trials of the travelers to India, in order to get another geographical area to generate efficacy data.

The Pandemic Influenza Vaccine Patch System, we are undergoing a Phase II clinical trial, which from the clinical contact point of view, has been completed we are in the moment the data analysis phase. We had a couple of months delay here because of validation work we still have with the assay. But to be sure that the data we will generate are the ones which (technical difficulty) based on what we have seen in Phase I previous.

We are leading the field of nosocomial vaccines. This is a virus vaccine which is in the Phase II/III trial which is a (inaudible) trial in cardiothoracic surgery patients. We expect first interim efficacy data from an analysis in 2010. The analysis is driven by appearance of an absolute number of cases we have not yet reached, but are confident in 2010.

Our Pseudomonas vaccine, again the leading program in this field, is in Phase II. We have reported preliminary data showing that the immunogenicity for this vaccine is very good, also in a difficult patient population like ICU patients, and we are now working towards a final data which should also give us some ideas around efficacy in the third quarter 2010.

Other programs, our Pneumococcus vaccine, broad covering vaccine based on three different proteins. The vaccine broad coverage of [action], we have seen positive Phase II safety data, as expected, and are now confident to go ahead further with clinical trials.

Our Hepatitis C vaccine, there is news which has been announced in the report today, namely that we as announced already and out of the partnership with Novartis that the plan was that we do therapies which combine our vaccine with other therapeutic concepts of Novartis which to the point did not work out. But we decided to take the opportunity out.

This moving out, we've got the worldwide licenses from Novartis, dominating genomic [HC] patents now enables us also going with the vaccine to the United States which was not possible before we made this agreement.

Tuberculosis, this is a vaccine leading [today] the field of new tuberculosis vaccines, doing this together with Sanofi (technical difficulty) for clinical results from a variety of studies that are currently forming with our partners.

On our financials, I would like to reiterate that we have made a strategic decision in the company that we heavily invest in our strongly progressing pipelines. This is where we believe still that the value of this company lies. Execution on development programs and bringing products -- additional programs to market, alone or with our partners, is reflected by quite significant spending in R&D, namely the late stage programs which are at this point in time not yet offset by our revenues.

But we could certainly also run the company completely different just not going so aggressively in development pipelines and generating profit. But we have with the acquisition latest of IMI that we really focus on the pipeline and as long as data are right to move with the different programs (technical difficulty). Because we in all cases really leading the field and would like to use the chances (technical difficult) get out of that.

We have a strong cash position which has only very slightly diminished as to the year before, which will be further on a strong basis for the growth of the (technical difficulty).

Page nine, a little bit of history, we thought that having many of these conferences and discussions it might be a good idea to remind you where we come from and what our history is. I don't want to go into this in detail, but it gives you a nice view on how the company has developed from very early [university] (technical difficulty) in more and more maturing vaccines.

At this point I would like to hand over to our Chief Financial Officer, Reinhard Kandera for the financial performance of 2009.

Good afternoon, ladies and gentlemen, good morning to the US. Let me start with a brief overview on the fourth quarter result on page 11 of your presentation. Let me stress that these are preliminary numbers. They have not been audited. They have not been reviewed. We expect final numbers within the next couple of weeks and will be published in our Annual Report.

Now looking at the fourth quarter, we saw a very strong quarter in revenues, mainly resulting from collaboration and licensing revenues from our new GSK partnership.

We also saw continuous strong spending in research and development in our late stage pipeline projects. As a result of the lumpiness of our revenues, if you look at the last quarters you see volatility in our net profit line, Q4 was positive, but we could not make up the losses of the first three quarters. So full year 2009 shows a net loss.

We have a very strong cash balance with EUR180m year end, 2009, and the development of the last quarter shows you that we have been able to very well manage our strong cash balance.

Let me turn to page 12 to some more detailed figures of the fourth quarter. We saw revenues of EUR32.2m, R&D spending of EUR16.8m, SG&A expenses of EUR4.9m, other operating income of EUR1.7m, mainly resulting from currency effects with some minor finance income and as a result of our positive pre-tax result before income tax expense moderately resulting in a net loss of EUR7.6m for the fourth quarter.

Looking at the full year 2009, we had EUR61.7m revenues, EUR62.5m R&D spending, EUR17.4m in SG&A. Other operating income of EUR0.2m, finance income of EUR2m and a positive income tax effect of EUR10m, resulting in a net loss of EUR18.4m.

Looking at some of those positions in more detail on page 13, for the full year 2009 we saw again a growth in our revenues. Out of this revenue number, EUR7.7m comes from sales revenues of our Japanese Encephalitis vaccine.

I have mentioned the net loss of EUR18.4m. Looking at cost of goods, we saw cost of goods of EUR12.5m exceeding the revenues from the products in first year of sales due to significant write-offs of finished products and of unfinished products.

Our R&D expenses of EUR62.5m resulted mainly from our in house late-stage development program, for mainly Traveler's Diarrhea, Pseudomonas, Pandemic Flu, and other programs.

Our SG&A expenses rose moderately by 7.6%. Please don't forget that in late 2008, we acquired a company in the US. We were able to very moderately increase our SG&A expenses as a result of that, and please don't forget that we have our first year of sales, so there was some increase in sales expenses, obviously, but overall SG&A shows that we have very tight cost control in this area in place and that our focus is really to use the money in spending on our R&D pipeline.

We end the year with a very strong cash balance of (technical difficulty) in cash and in marketable (technical difficulty).

Turning to the next page, 14, gives you an overview of the last three years and a look in 2010. For 2010 our strategy is to make use of our strong financial position aggressively, move our pipeline forward through R&D spending and this will result in a loss also in 2010 similar to the loss that we saw in 2009. But we also think that we will show further progress in the sustainability of our revenue line, aggressive spending on the R&D side, but also maturing, increasing our product sales from Japanese Encephalitis (technical difficulty) in 2010.

And looking at the different positions in more detail, let me give you some comments on that, summarized on page 15. We expect product sales to increase by the second quarter of 2010, namely we have strong potential also from collaboration and licensing income from multiple milestone events that we expect in 2010 but also from potential new partnerships. And we also expect continuous grant income from HHS, from PATH and from other agencies as it constitutes to the funding of our program.

We expect to grow R&D expenses by between 10% and 20% in 2010. We expect to maintain tight cost controls in general and administrative expenses and expect to moderately increase our sales and marketing expenses as our Japanese Encephalitis sales uptake becomes stronger. The net loss expected for 2010 should be comparable to the net loss this year.

Now in 2009 we spent and we implemented strategy on the basis of a strong cash position (technical difficulty) still to maintain such a strong cash position also in 2010.

So let me stress as a summary we think that we have a very good and strong financial position and this is something that we should not forget. That a biotech company implements our strategy of R&D costs on a very solid financial basis on the one hand by existing cash reserves that we have, but also on a steadily growing revenue basis and this is what we think can be called a strong cash and financial position (technical difficulty) a promising biotech company.

With this, let me hand over to Thomas Lingelbach for the operational update.

Thank you very much. It's a pleasure for me to give you a more detailed update on our first product and on our clinical program. We are proud of our very first product which is called IXIARO and/or JESPECT in the respective territories. This got approval in all key territories as Gerd mentioned already, US, Europe, Australia and Canada, totaling 32 different countries. We have launched already the product in the key countries which are roughly 50% of all the countries in which we have got approval to date. Product sales are expected to take up this year substantially, starting primarily as of Q2, due to our sales and operations planning process and respective product release times.

We have initiated a very important development step on this program to really extend the label to pediatric use. This activity is well underway and we are expecting further territory approval in some high value countries still in 2010.

As Gerd mentioned already during his introductory presentation, we are facing a slight delay with our partner Biological E for the approval of the product in the endemic countries. Biological E are producing the product according to Intercell's technology and has experienced a change in the regulatory environment, so that the Phase III that was originally planned to start already, has to be shifted towards the latter part of this year.

Talking about marketing and sales on page 18 and the growth potential of our very first product. It is very important to understand that for such a vaccine, where there has never been any approved vaccine, at least not in Europe, for those key [activities] and key unmet medical needs, awareness and vaccination rates are key.

We are focusing on increasing the levels of awareness to increase the right target marketing approaches in order to allow vaccination rates aiming roughly at 6% of the so-called unique travelers to those territories and countries where the disease is endemic. And based on those vaccination rates, which we hope to achieve as Gerd alluded before, in five to 10 year timeframe, the market potential of this vaccine can be fully leveraged.

On page 19, you see the summary on our GSK alliance and our patch technology. We are very pleased with the collaboration with GSK on our patch technology. And our lead program is a program targeting Travelers' Diarrhea and we have entered with GSK in a respective marketing and distribution arrangement, and this can be shown on page 20. So GSK are responsible for the global marketing and distribution and we continue to develop this front running program towards licensure.

The other area of the GSK collaboration is linked to our pandemic influenza vaccine under the collaboration program with HHS and again here we will have a bright future in co-developing and co-marketing this product towards licensure.

On the vaccine delivery patch, we will leverage on our vision to really build on patch delivered vaccines for either existing or new antigens and/or (inaudible).

Talking about our very first program on patches, who expect its licensure, Traveler's Diarrhea, a quite significant risk for travelers to the developing world, with quite a substantial market potential by far exceeding even the potential for our first product on the market, our Japanese Encephalitis vaccine. We are progressing this program aggressively towards licensure and we have initiated our first Phase III efficacy study complemented with partner's efficacy study in India as already discussed during the introductory section.

Furthermore, we will build on future Phase III trials to confirm the safety and lot-to-lot consistency, we will build up our commercial manufacturing and supply chain, and then focus and target on regulatory filings during 2012 timeframe.

Page number 23 shows you our basic principle of the Pandemic Influenza Vaccine with the Vaccine Enhancement Patch. It is combining an injected pandemic influenza vaccine with a Vaccine Enhancement Patch put on top of the injection site acting as an external adjuvant. This one dose single application potential might reduce significantly the risk of a capacity shortage and will allow to clearly protect individuals in case of a pandemic threat fast -- much faster than based on a two dose vaccination schedule.

And last but not least we expect the Vaccine Enhancement Patch to be not strain specific and hence can be manufactured in advance of a pandemic and stockpiled.

From a timeline perspective, page 24, we are executing our Phase II study as we speak. We are in the final phase of validating the clinical data, we have one assay as Gerd mentioned already at the beginning that we need to fine tune before we can really get to the final trial results, but we expect those results to be in line with our expectations and be in line with data we have already obtained during a respective Phase I clinical trial setting.

With our new partner, GSK, we will bridge into another Phase II trial combining our Vaccine Enhancement Patch with GSK's (inaudible) vaccine under our existing HHS collaboration. And then we will conduct further industrialization and manufacturing steps, initiate a Phase III and focus towards filing in the 2012/13 timeframe.

We are clearly the leaders in the development of clinical programs targeting hospital acquired infections, and our lead program staph aureus partnered with Merck, will show first interim data in cardiothoracic surgery patients, still this year according to Merck's guidance. And we have not yet reached the right incidence rate to start the interim analysis, but we do not see this as a negative, we see this as a positive signal in this trial execution and in this product development activity.

On the Pseudomonas vaccine, our second key program in the hospital acquired infection arena, we have completed the enrollment of 400 subjects, very difficult clinical setting in mechanically ventilated ICU patients, and we expect the final report in Q3 2010. The study is not powered for efficacy but will give us, hopefully a first hint on the vaccine efficacy then allowing next clinical development stages.

From an overall timeline perspective, page 26 shows the staph aureus development and regulatory pathway as we see it at this stage and I don't want to go into further details on that. We can come back to that on milestones anyhow.

Page 27, shows a couple of more topics related to our Pseudomonas vaccine. It is a product we have developed here in-house and the indication is besides obviously the mechanical intubated patients, possibly such cystic fibrosis and others like burn victims and surgery patients.

The design of the trial was a randomized placebo controlled, double sided study, with 400 patients, and as I have said before, primary endpoint on immunogenicity and only as a secondary endpoint reduction in infection rates on Pseudomonas. We saw after 225 of the 400 patients, good safety and tolerability of the product candidate and a robust induction of functional antibodies. The 10% rate of overall observed Pseudomonas infections was at the lower range of what we had expected and we expected in between 10% and 20% overall infection rate.

Moving forward, obviously the next clinical milestone will be the data and the data will trigger a potential Novartis opt-in under the already mentioned Novartis strategic alliance agreement.

On page number 30 a couple of key highlights on our other clinical development programs. Streptococcus pneumoniae vaccine, a vaccine built on Intercell's technology platform, its antigen identification platform, has successfully concluded its first Phase I. Has shown positive safety and immunogenicity and is now ready to get entered into the next target populations, which means children and elderly development programs respectively.

Therapeutic Hepatitis C vaccine, we have mentioned already the shift there. Intercell receives now the non-exclusive worldwide license from Novartis and will enter into a new partnership or new partnerships to conduct combination studies and we expect this to happen still this year.

On the tuberculosis vaccine under the AERAS Foundation, where we see really very, very positive data, we are expecting that further Phase I programs will proceed according to plan.

With this I would like to close the section related to our product and clinical development programs and I would like to hand back to Gerd Zettlmeissl.

We have seen from the presentations we gave so far that important growth and various steps are well underway. Let me just shortly summarize again on page 32 what are the main news to come for our programs. We expect obviously next data from our Phase III from children for travelers market. And later in 2010 the start of the Phase III in children in endemic countries, namely India, and expect the first approval in endemic countries in 2011.

Travelers' diarrhea vaccine Phase III clinical trial is well underway and we expect data by the end of 2010, early 2011. Also in 2010 we expect to see the interim data from the Phase II/III efficacy study in staph aureus with our partner Merck. And earlier, namely in Q3, final data from our phase II in Pseudomonas which would lead then according to our current plan with Novartis in situation where Intercell then can choose between a milestone agreement or a co-development pathway towards the end of the year.

We have received very promising Phase I data in our Pneumococcus vaccine and intend now to do clinical studies in the target populations, namely the children and the elderly. This result expected in 2011.

Now our other vaccines including flu, we will see the Phase II pandemic data from the current ongoing study in Q2. And have then multiple data points from other clinical studies in our partnerships including tuberculosis and flu where flu is done with Novartis. The strategic alliance for HCV and start of clinical combination studies again is planned for 2010 as mentioned before.

Obviously we see and I think this has been highlighted during the presentation also further opportunities for out-licensing our vaccine patch, delivery patch and the Vaccine Enhancement Patch. Also with abilities to broader use of our IC31 in new vaccine indications namely where key cell immune responses become important. And we're also working still steadily on antibody products in infectious diseases and also would like to see here major progress and partnership opportunities.

I would like at this point to conclude our presentation and to say goodbye to the people who have been dialing in just on the webcast and I would like to open the question session and answer session. Thank you very much for listening and we are looking forward to the questions.

Thank you. (Operator Instructions). The first question is from Romain Zana from Exane BNP. Please go ahead.

Yes, good afternoon, gentlemen. Thanks for taking my question. Couple of questions regarding IXIARO. The first one, could you give us an idea of the penetration rate observed in countries where the vaccine has been launched for more than one year now?

And second question, could you just give us an idea of the growth that you expect for IXIARO in 2010? Thanks.

Okay, let's talk about the penetration rates. There are countries where we have seen penetration rates already after nine months, in between eight and nine months, of actual sales in the country that are in the reach of 4% to 5%, which is quite encouraging and really confirms our assumptions on the product potential. Those are obviously countries where we are working now also towards the expansion and extension of the national recommendations, which are key.

For 2010 we expect obviously a significant growth given the fact that this will be the first full year. But we are not able to give a real financial guidance on the sales revenues to be expected, especially because we are working here with partners and we are recognizing obviously our sales revenues at the point when we sell product to the partners and there are subsequent supply chains behind that. But we expect really a significant one.

Okay. Maybe a follow up question regarding IXIARO if I may. Just in the military US market do you still see some significant stockpiles of their previous version from Sanofi? And if yes when do you expect this to come to an end with maybe a significant renew of the contracts with -- to switch to IXIARO obviously?

First of all, as you know we have a five-year exclusive supply contract with the Department of Defense. We see already now stockpiles significantly depleting so which means shelf life expirations of existing stock. And we see already quite an interesting uptake of the product in the DOD channel. This will obviously be a bit back loaded this year but we have a quite significant expectation as far sales into the military are concerned. And the last stocks should run out towards the end of this year, early next year.

Okay, thank you very much.

The next question is from Brigitte de Lima from Merrill Lynch. Please go ahead.

Good afternoon, a couple of questions please. The first one is I just wondered if you can provide a little bit more clarity on what you mean by the changed regulatory path to licensure by Indian authorities. What exactly are the regulators asking for that's causing the delay?

Second on the increased R&D expenditure, if I look at it the Pseudomonas trial is going to completion sometime this year, so if you were to explain where the extra R&D expenditure's going into, is that mainly just sort of a broad investment into your early stage pipeline more than anything else.

On staph, you said that you expect the data still in 2010. Does that mean that we should expect the data closer to the end of this year?

And then the last question I have is regarding the Pseudomonas [safe], the Pseudomonas vaccine. How quickly do you think you can start a Phase III trial assuming that the Phase II data's positive? Thank you.

Okay, (inaudible) this is Thomas speaking. So with regards to India, what happened was the following. We had scientific advice, together with our partner Biologic E, already more than one year ago in which the Indian authorities had agreed to basically allow entry into the Phase III right away based on the Phase II data obtained in India with products manufactured out of Intercell based on the comparability approach. This guidance was changed very recently due to a change in the regulatory requirement and hence Biological E need to conduct a small bridging trial, which is a kind of Phase II trial, before they are allowed to enter Phase III. That's nothing that will diminish at all the probability of success but will put some pressure on the timeline.

Your second question was addressing where the R&D spending in 2010 would go to. Our most extensive program is the Travelers' Diarrhea vaccine where we have started the Phase III trial in October and this trial will continue to enroll patients until mid of the year basically. And then we go in all the testing procedures so the major cost burden from this Phase III trial falls into 2010. So there is certainly an increase here.

We still have costs for our ongoing Pseudomonas trial, as you said, with results expected in the first quarter. We plan further pandemic flu trials. As you know we've seen positive Phase I data from our pneumococcus vaccine and expect to further develop clinically [a lot] this product. So there is a multitude of programs with certainly the late stage programs that are most heavy spending, but we also do not want to cut down on the early research. For example, we're intensively working on the (technical difficulty)clinical candidates out of pre (technical difficulty) also in 2010.

Hi, Brigitte. It's Gerd speaking on your other two questions on staph aureus. As you know the interim analysis in the trial is driven by an absolute number basis, which have to be reach of staph aureus infection cases, which have to be reached within the trial. The recruitment is going now at full speed to all centers, which were planned since end of last year in the trial.

If we would make some projections going forward with the rate we see at the moment it would be going into the, certainly into the [quarter] 3, 4 2010. There is also not a completely linear uptake of cases in the study, so that we unfortunately to live with the situation that we say, okay there's a timeframe where we expect to get the number of cases which allow then the interim analysis. Unfortunately we cannot be more precise at this point in time.

On the Pseudomonas, after the Phase II data, there needs to be a program run on the industrialization of the product, in the upscaling and production of [clinical] material and the final manufacturing scale. This will be only started after we have received the Phase II final data. We feel that this will take us a year to 18 months leading us towards the end of 2011 potential start of (technical difficulty). Hello.

Hello, hi, sorry you kept cutting off. Apologies, for staph did you say data most likely in Q4? Did I understand that correctly?

Yes, most likely towards the end of the year in Q4 but as I said before it is not linear.

It's not linear, yes, okay, understood. Thank you very much, bye-bye.

The next question is from Oscar Izeboud from Kempen. Please go ahead, sir.

Good afternoon. Two questions related to financials. First of all on the inventory write-downs that you mentioned do you expect more inventory write-downs to happen in 2010? And also related to this, what do you think about development of you COGS in 2010. Last time you explained that this was related to also to the ramp up of your sales.

And secondly, I try to understand how you treat the GSK upfront that you received last year. Was it fully booked in 2009, this means is there no deferred revenue coming from GSK upfront? Thank you very much.

Yes, thanks for the questions. Coming to inventory and cost of goods, obviously you know that we have a single product manufacturing plant for this product, meaning in the first time of the launch we have overcapacity that needs a bit to write off. Cost of goods are obviously also high, cost of goods are obviously also driven by that overcapacity. And yes, we do expect to improve that significantly with full capacity and once we are able to supply products into the market obviously we'll also see write-offs decrease.

With regards to the GSK upfront payment, we have recognized about EUR25m in fourth quarter and the rest has been deferred and will be recognized over the next couple of years.

Okay, and then once more on the COGS and inventory. Do you think 2010 will already provide enough sales to make this look much better?

It certainly looks better than in 2009.

But can you quantify?

At this stage, sorry, we cannot quantify.

Okay, thanks you very much.

The next question is from Vladimira Urbankova from Erste Bank. Please go ahead.

Hello, good afternoon. Just most of my questions already answered but still some left over. So on Japanese Encephalitis vaccine sales, could you indicate what was approximate sales breakdown by territory, at least US sales and the European sales?

And maybe also in terms of cost of goods sold, what is in your opening --optimal gross margin to be expected once full capacity has been reached in this product.

And the last question would be regarding tax credit. Do you expect to use them also going forward or what's the policy in this respect? Thank you.

Coming to your first question breakdown of sales, so our 2009 sales include sales to the US, to the military in the US, sales to Australia obviously and to European travelers markets. But please understand that at this stage we do not disclose a detailed breakdown of those sales.

In terms of the long-term gross margin we think this will be in the range of 30% to 40%.

And in terms of -- what was your third question?

Tax credits, if you plan to use them also in 2010 and to what extent?

Yes, to the extent that we have losses we can use these losses as loss tax carry forwards and some positive tax effects, although they will not be significant as 2008, [in 2010.] So expect them to somewhat lower in 2010 given our net losses. [Hello].

Yes, I am permanently getting cut off so I think we can continue discussions maybe at point later. For now thank you very much.

Thank you.

The next question is from Gunnar Romer from Deutsche Bank. Please go ahead.

Yes, hello, Gunnar Romer, Deutsche Bank. One more follow up question on IXIARO. In your report you were mentioning a shift from Q1 to Q2 due to long release time for European markets. Maybe if you can explain this a bit more in detail.

And secondly, would this imply further sequential decline for the first quarter in 2010 before we see a pick up in the second quarter?

And lastly, maybe if you have a feedback from Novartis that you can share with us on which might also support your confidence for a pick up in the second quarter. Thank you.

So let me try to explain to you the situation on IXIARO. First of all we have obviously with our partners a sales and operation planning process in place. We supply the product to our partners. The partners then do the market sales and obviously there is a quite complex supply chain. And this is the reason why we have also decided to release only a couple of batches initially in the first quarter. This got postponed due to some release testing taking a bit longer in this first quarter so therefore the in market phase will shift into the second quarter.

This will not affect at all our this year's plan for the product. And we have a rolling forecast mechanism in place with our partner that obviously allows us to be very confident about the product that will be taken into the market in 2010. In addition this is a seasonal product and this is something that one should not forget. So there are certain periods in the year when sales will be higher and this is especially [the] key travel seasons and compared to other periods in the year. I hope that this answers your question to IXIARO.

Hello, can you still hear us.

Okay, it would seem that the colleague is not with us anymore. (Operator Instructions). The next question is from Guillaume van Renterghem. Please go ahead.

Yes, hi, it's Guillaume van Renterghem from UBS. Just one question actually on your staph aureus Phase II/III. You say that you see (inaudible) the fact that you have [treat in patient] rate as a positive but you cannot argue the other way around and suggest that maybe just by being monitored, physicians are just being more careful and basically the procedure is getting cleaner. Therefore you may have actually a better outcome and you may end up actually with actually placebo effect higher than expected.

I'm just wondering actually how you take that into account and whether the new patients recruited actually make sure that the procedure between the -- I mean the procedure that is currently done is exactly the same as the procedures that used to be down when Merck actually tracked all clinical trials, sorry all clinical centers.

Obviously you are completely right that obviously in such clinical trials also a drop in the infection rate can be reason for the observation of lower number of cases in a trial. There was [pre] studies being down before this clinical trial has been started to determine over a relatively long period of time the incidence rate of post staph aureus infections post cardiothoracic surgery. These determinations and rates were relatively constant over a relatively long period of time so that likelihood that suddenly now when you do the clinical [trials] essentially the same centers where the pre study has been done is dropping this relatively unlikely. Obviously there's no way to exclude that [for us] at this point in time but we think it's unlikely and also that our partner Merck (technical difficulty).

Okay. And can you update us actually on the number of patients that so far has been recruited and how many patients do you think you're going to recruit? Is the target of 8,000 still your current target?

At the moment is range of around about 4,000 recruited. And we think we are more towards the 5,000 to 6,000 likely (inaudible) number of subjects or cases such as getting the infection or cases of infections figure to trigger the interim analysis.

Okay, but do you think that 6,000, [less than] 6,000, is going to enough for you to file and therefore when do you expect actually your filing.

You know the whole trial is going for in total maximum of 8,000 subjects. It depends on the outcome of the interim analysis. If the interim analysis would be statistically significant for the endpoint [determined] already then, yes, this could be the study, (inaudible) study results. But this still needs then additional studies, most likely some of safety and consistency studies as Thomas mentioned before with other vaccines, to be conducted in the 2011 timeframe and only then the filing could take place.

Okay, thank you very much.

Excuse me, there are no more questions at this time.

Okay, then we can conclude. So thank you, everybody, for coming into this call with Intercell. We appreciate your interest and to follow us over all these years. If you have individual questions please don't hesitate to come back to us directly. Thank very much and bye-bye.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.