Vaxart Inc (VXRT) 2002 Q1 法說會逐字稿

Thank you for holding. And welcome to the Nabi Biopharmaceuticals Q1 2002 earnings release conference call. I'd like to inform all participants that today's conference call is being recorded at the request of Nabi Biopharmaceuticals . I'd also like to inform all participants that your lines will be in a listen-only mode until the question-and-answer session of today's conference call. I would now like to turn the call over to Mr. David Gury, Chairman, President and CEO. Thank you, Mr. Gury, you may begin.

Thank you very much, , and thank you all for joining us to discuss our first quarter results. Joining me this afternoon is Tom McLain, our Executive Vice President and Chief Operating Officer, and Mark Smith, our Senior Vice President of Finance and Chief Financial Officer.

We've been advised by our Legal Department to -or counsel, to point out that remarks made in this conference call and webcast may contain forward-looking statements reflecting the company's current expectations about future events. Any time statements are made about the future, actual results could differ materially from what is projected. Risk factors are disclosed more fully in the company's Form 10K filed with the Securities and Exchange Commission and any subsequent SEC filings. Information discussed in today's call and webcast is time-sensitive and is accurate only as of today, April 24, 2002. Any redistribution, retransmission or rebroadcast of this call or the webcast in any form without the expressed written consent of Nabi Biopharmaceuticals is prohibited.

I would like to begin with an overview of key business developments at Nabi. And after that, I'll ask Tom to talk about operations and Mark to discuss the financial position of the company. And then we'll open up the lines for questions. In our February conference call, we reported on our successful transformation in becoming a fully-integrated, biopharmaceutical company that discovers, develops, manufactures and markets products. On March 5 of this year, in recognition of this multi-year transformation, we announced that Nabi has changed its name to Nabi Biopharmaceuticals , a company with a very bright future. Our strategy and our vision are straightforward. With the cash flow we generate from operations, we are investing in innovative vaccine and antibody products with the potential to revolutionize the way doctors treat significant unmet medical needs. Our focus is in the areas of bacterial and viral infection and addictive diseases.

As a product development driven company, I'd like to focus the remainder of my comments today on progress in advancing our pipeline. The value of our Gram Positive Infections Program was affirmed by the publication of the results of the initial Phase III trial for StaphVAX in the "New England Journal of Medicine" this past February 14th. This trial is an important proof of concept for our conjugate vaccine technology, as well as for the antibody approach that is the foundation of the nine products in our Gram Positive Infections Program.

Our internal activities are focused on the preparations required to initiate confirmatory Phase III trial for StaphVAX, which we expect to begin in 2003. Throughout this first quarter, we have continued to make progress in transferring the manufacturing for StaphVAX to our contract manufacturer. Material made in this factory is intended to be used in the confirmatory Phase III trial. We look forward to reporting the results of our StaphVAX Booster trial later in this second quarter, which is within the timeline established in our February conference call. We also are seeking an opportunity to present the detailed results of the booster trial in an appropriate medical conference later this year.

Our progress in developing new products will quickly accelerate in 2002. We expect to introduce two products into their first human clinical trials and also initiate additional clinical studies of Altastaph this year. We accomplished one of these important clinical milestones already in 2002, with the beginning of the initial human clinical trial of Civacir. The first patient was infused with this product at the University of Virginia in late March. The clinical trial is sponsored by the National - Allergy and Infectious Diseases for NIAD, a part of the National Institute of Health, and is being conducted as five study sites in the United States.

This product is important to us for several reasons. First, Civacir has the potential to address a significant unmet medical need for liver transplant patients suffering from Hepatitis C or HCV. Re-infection with HCV is almost universal in liver transplant patients suffering from chronic HCV. The extent of this medical need was the subject of a cover story you may have seen in "Newsweek" last week. This important need was also noted by Dr. of the University of Virginia in his address during the dedication of our new manufacturing facility on April 15th. Manufacture of Civacir will take place in our manufacturing facility in Boca Raton, which is the second reason why this is important to us; utilizing that manufacturing facility to leverage our investment in our facility and putting us in total control of the quality and quantity of the product.

The third reason is the raw material for Civacir is HCV-enriched plasma collected within our network of FDA-approved antibody collection centers. This allows us to further leverage our investment in infrastructure and take advantage of our long-term experience in conducting specialty antibody collection programs. Finally, the doctors who prescribe Civacir are already acquainted with Nabi Biopharmaceuticals , with our Nabi -HB product. We look forward to reporting on the results of this trial in 2003.

During the first quarter, we also advanced our other investigational products. The second product expected to be introduced to human clinical trials in 2002 is NicVAX, our novel vaccine for the treatment and protection against nicotine addiction. The initial trial will be a Phase I Safety Study, and this trial will be funded by the National Institute on Drug Abuse. We also expect to begin additional studies of Altastaph in adults with staph infections in later this year.

Yesterday we announced that the US Patent and Trademark Office has issued a patent to Nabi Biopharmaceuticals covering the composition of beta in specific antibody-based therapies, and the methods for using these compositions for preventing and treating infection caused by certain microorganisms. The addition of this patent further strengthens the intellectual property behind our antibody-based therapeutic programs.

On April 15, we celebrated a significant milestone in our development as a fully integrated, biopharmaceutical company. We officially celebrated the opening of our state-of-the-art biopharmaceutical manufacturing facility in Boca Raton in a dedication ceremony attended by Florida's Governor Jeb Bush, US Congressman Mark Foley and a number of state and local officials. The facility manufactures Nabi-HB, our leading antibody-based therapy used for the prevention of Hepatitis B virus. At this facility, we also manufacture our two investigational antibody-based therapies, Altastaph for staphylococcus aureus infections and Civacir for Hepatitis C. The facility is dedicated to the memory of Congressman of Boston, Massachusetts, and all individuals whose lives are significantly prolonged by such products as Nabi-HB.

On March 19th, we announced that we would redeem our 6.5 percent convertible debt in the amount of $78.5 million. On April 8th, we completed the redemption and we are now completely debt free. After eliminating the debt, we believe that we have retained the resources necessary to further our objectives for expanding our current operations and launching the products in our pipeline. I'd now like to ask Tom McLain to briefly update you on operations for the first quarter.

Building off the momentum of 2001, our operations are off to a strong start in 2002. As Dave noted, we held the grand opening of Boca Raton Facility on April 15th. That timing was appropriate because during the first quarter of 2002, the FDA approved the release of the initial production lots of Nabi-HB made in this facility. And products from those lots were sold in the first quarter of 2002. Now we control the quality and quantity of this product, from collection of the antibodies in our plasma centers, through manufacture in our own facility and through sales and marketing. This is a very significant milestone in the development of Nabi Biopharmaceuticals . And we appreciate the effort and expertise of the talented team of employees who made this happen.

Now we have a fully operational manufacturing facility that will generate a positive cash return for Nabi in 2002. And we are focused on further improving the cash return from this facility by more fully utilizing the available manufacturing capacity. We expect to unlock value from this opportunity on multiple fronts. First, we're working to expand the market for Nabi-HB. In January we announced the signing of an international distribution agreement with in Turkey. Production of product and the initial shipment to this distributor are expected to take place this year, increasing the utilization of manufacturing capacity. This agreement is the model for additional international distribution agreements for Nabi-HB, which we expect to announce later this year. Those agreements should benefit operations in 2003 and beyond.

Next, we continue to seek near-term operations for manufacturing on behalf of other companies, contract manufacturing. In 2001, we signed and announced two contract manufacturing agreements and we have already initiated contract production in our facility this year. Based on the shortage of available manufacturing capacity of this type, and a number of products on the market are currently under development, we anticipate signing additional contract manufacturing agreements in 2002. Third and finally, we're working to replicate the success of the fully integrated model of Nabi-HB with our pipeline products, Civacir and Altastaph.

Now I would like to turn to biopharmaceutical product sales. As you may recall, our biopharmaceutical sales are reported at the point sales are made into the distribution network. Working through this distribution network has established a seasonal pattern of sales for our products, whereby sales are highest in the fourth quarter and lower in the first quarter. To increase our understanding of long term sales trends and to optimize our ability to manage our business, we review internally and externally generated end-user or sell-through data for all of our biopharmaceutical products. Based on these reviews, long-term sales trends for our two leading biopharmaceutical products, Nabi-HB and WinRho SDF and Aloprim continue to demonstrate end-user increases. And as inventory levels at wholesalers and distributors come down, we expect to see growth in reported net sales as we move through the rest of 2002.

In fact, results for Nabi-HB in the first quarter reflected our success in reducing inventory levels in the distribution network in the second half of 2001, as well as the initial buy-in of Boca manufactured products. Results for WinRho SDF on the other hand were limited in the first quarter, based on strong buy-in in the fourth quarter of 2001. That buy-in was in anticipation of 2002 price increases. But end-user sales are up and we're working to reduce inventory levels of WinRho in our distribution network in 2002.

We also continue to focus on Autoplex Product Supply, a critical issue for sales of this product. The supplier of Autoplex has been unable to provide us with reliable supply for several quarters now. And consistent with recent reporting periods, we have benefited from a contractual penalty based on the manufacturer's failure to deliver a minimum supply of product in the first quarter.

We also continue to make progress on product acquisition and end-licensing opportunities in the first quarter. We plan to add one or more products to our portfolio between now and the launch of StaphVAX. This will further increase the return from our sales and marketing infrastructure. Our focus is on products targeted to the doctors we call on today, oncologists, hematologists, and transplant physicians, as well as the physicians who will be important to the success of our Gram Positive Program.

I also want to take this opportunity to re-emphasize our commitment to finding the right development partner for the Gram Positive Program. We have continued to devote considerable effort to this since our February conference call. While we will not set an expectation about when we would complete a partnering agreement, I can assure you this is a top priority for Nabi Biopharmaceuticals . The ideal partner continues to be a company that will contribute expertise and resources to accelerate the time-to-market for these important products. A company with access to the financial resources to share in the development and commercialization expenses of the program. And a company that can work to address the regulatory and commercialization requirements for markets outside the United States, where Nabi Biopharmaceuticals has not yet established a presence. At this point, I'd like to introduce Mark Smith, who will review our financial performance in the quarter.

Thank you, Tom. Consistent with the expectations we communicated in our year-end conference call, we generated a loss in the first quarter, which totaled $661 thousand or two cents per share on a fully diluted basis. This is one cent per share off published expectations, because our results for the quarter include a one-time write-off of capitalized loan fees totaling $400 thousand or one cents a share, related to the debt repayment Dave discussed earlier.

Overall, we generated a positive EBITDA of $3.3 million reflecting increased gross margins earned on product sales and after funding a $1.4 million increase in research and development expenses. We believe this demonstrates the success of our strategy to build a base business capable of supporting our investment in developing a very strong and very promising product pipeline.

Overall sales for the first quarter of 2002 were $41 million, compared to $60.2 million in the first quarter of 2001. We expected this decrease because sales for the first quarter of 2001 include sales from the 47 antibody collection centers we sold in September 2001.

Let's now walk through the key line items on our income statement to understand Nabi Biopharmaceuticals' performance. Biopharmaceutical product sales were $15.3 million in the first quarter of 2002, compared to $15.1 million in the first quarter of 2001. Biopharmaceutical sales benefited from a 30 percent increase in sales of Nabi-HB in the first quarter of 2002, as we completed the transition to selling Nabi-HB manufactured from our initial production lots during this first quarter. This is very significant, because Nabi-HB is our highest margin product.

WinRho sales were down in the quarter, reflecting buy-in from our distribution network in the fourth quarter of 2001. Antibody product sales were $25.7 million in the first quarter of 2002, compared to $45.1 million in the first quarter of 2001. A long term focus of the antibody business has shifted to providing specialty antibody products for use as raw material in the manufacture of our own current and pipeline antibody-based therapies. In the short-term, we managed the antibody business opportunistically to generate incremental operating margin and cash flow to fund the development of our research and development product pipeline.

The significance of these sales results is evident in our gross margin. After accounting for royalty expense, our gross margin increased to $14.1 million in the first quarter of 2002, compared to $13.6 million in the first quarter of 2001. This represents an increase in gross margin as a percentage of total sales of 11 percent to 34 percent. This $500 thousand increase in gross margin and the resultant are key to enabling us to increase the investment in our research and development pipeline.

Consistent with the expense guidance we provided on our February conference call, we significantly increased our investment in our research and development activities. Research and development spending increased from $3 million in the first quarter of 2001 to $4.4 million in the first quarter of 2002. This increase reflects support of StaphVAX, as we continue ready the facility for manufacture of clinical trial material to be used in the confirmatory Phase III trial scheduled to commence in 2003, increased spending on Civacir, primarily for manufacture of clinical trial material and the continued development of NicVAX.

Selling, General and Administrative expenses were $9.1 million in the first quarter of 2002, compared to $8.9 million in the comparable quarter of 2001. These expenses include the impact of increased cost for insurance, consulting and employee benefits. Note that selling and marketing expenses were not impacted by the sale of the majority of the antibody business in September 2001.

As Dave noted, on March 19th, 2002, we announced that we would redeem our 6.5 percent convertible debt on April 8th 2002. Taking this step, Nabi Biopharmaceuticals avoids interest expenses in excess of $3.8 million over the remaining term of the debt. This increases our ability to invest in research and development programs this year. As noted in our March 19th press release, in committing to the redemption of the convertible debt during the first quarter of 2002, we incurred an unplanned expense of approximately $400 thousand or one cent per share for the write-off of loan origination costs in the first quarter 2002. This expense has been accounted for as interest expense and included in other expenses. These costs were associated with the original issuance of the debt and were being amortized over the life of the debt as interest expense.

Also included in the interest expense is the interest on the outstanding convertible debt for the first quarter. In the first quarter of 2001 interest expense was lower as a result of capitalizing interest cost of $1.6 million related to construction of our Boca Raton manufacturing facility. Since FDA approval of the facility in October 2001, all interest costs incurred have been reported as interest expense.

Nabi Biopharmaceuticals ended the quarter in a very strong position, very strong financial position, with net assets of over $186 million and cash and cash equivalents on hand of over $126 million. After offsetting the cash balance for convertible debt of $78.5 million that was redeemed on April 8th, we had net cash and cash equivalents of $47.6 million. In addition, we had approximately $15 million of unused borrowing availability under our existing bank line of credit. The cash and cash equivalent balance at March 30th, 2002, decreased from December 29, 2001, by approximately $5 million. The decrease in cash and cash equivalents balance reflected payment of several first quarter obligations including bonus incentives, six month interest payment on our convertible debt paid in February 2002 and accrued payments to in conjunction with developing the vaccine manufacturing at their site. In addition, we paid $900 thousand for repurchase of shares of Nabi Biopharmaceuticals common stock in the open market in the first quarter.

Moving to our expectations for the remainder of 2002, we continue to believe that biopharmaceutical sales will increase more than ten percent in the full-year 2002 from 2001 levels. We also continue to project antibody sales in the full-year 2002 to be approximately 60 percent of the full-year 2001 levels. As noted in our year-end earnings call, initial operation of the plant will be dilutive to earnings due to excess manufacturing capacity. Based on plant operating expense levels and depreciation, we expect excess capacity expenses to be $3.5 million in 2002. As discussed earlier in this call, we continue to seek opportunities to optimize use of our manufacturing capacity by expanding the market for Nabi-HP through international distribution agreements and obtaining additional contract manufacturing agreements.

We continue to support the operating guidance - the operating expense guidance provided for the full-year 2002. Selling and administrative expense are projected at approximately ten percent below 2001 levels for the full-year. In 2002, research and development spending is projected to increase more than 25 percent from 2001 levels. For the full-year 2002, we expect to generate positive net income. But the real focus of our current operating plan is to generate the cash necessary to advance our extensive research and development pipeline and fund our capital investment requirements. Now, let me turn things back to Dave Gury.

Thank you, Tom and Mark. I'm very pleased by the success in advancing the development of our innovative pipeline of vaccine and antibody products. We are really enthusiastic about the potential for these products. And as a sign of this enthusiasm, let me tell you that during the quarter, several members of our management team, including myself, purchased our stock. We think this is an opportune time to invest in Nabi Biopharmaceuticals . And we're looking forward to sharing in the reward from our future successes with our investors. At this time, I'd like to open the line for Q&A. ?

Thank you, Mr. Gury. At this time, we're ready to begin the question-and-answer session. If you would like to ask a question, please press star, one on your touch-tone phone. You will be announced prior to your question. Once again, to ask a question, please press star, one. Our first question comes from . You may ask a question.

Hi, good afternoon. ask a question. I think you did give some guidance for 2002, maybe I didn't hear the guidance for pharmaceutical sales. But are you still saying that the ten percent growth this year, given that the first quarter growth over last year is pretty much flat?

Yes, we do continue to project a ten percent increase in biopharmaceutical revenues for the full year. And as Tom indicated, we base that expectation on our internal review of end-user or sell through to end-users of the biopharmaceutical products.

We talked about two things in the first quarter, Fariba, the first is that our Nabi-HB sales were up 30 percent.

Right.

As you'll recall, as we went through the second half of last year, we were working with the distributor channel to pull inventory levels of product down.

Right.

Now with our Boca-launched product, we're starting to realize the benefits of that.

Right.

And in the fourth quarter, the distributor channel bought in our WinRho product in anticipation of a 2002 price increase.

Right.

In the first quarter, the sales there weren't what we would expect normally because we're working down that higher inventory level in the distributor channel. But based on all the things we're seeing in end-user sales and as those levels of WinRho product get back to something that is more normal, we expect to see that sales increase year-over-year during the remainder of 2002.

And you think WinRho inventory build up have diminished this quarter?

It has diminished and we're going to work to bring it down farther as we go through the year. At the same time, we're seeing the end-use of the product increase.

OK. All right. Thank you. So the fact that 30 percent Nabi-HB was up, it was based on this quarter in comparison to first quarter of last year?

Yes, that's -- .

Because we don't see that 30 percent obviously, it seems like because of WinRho then, right? So the two effects kind of cancels out each other.

WinRho, and again as I indicated we still are having problems getting Autoplex.

Right. OK. Thank you.

You're welcome.

Once again, if you would like to ask the question, please press star, one on your touch-tone phone. Star, one. Our next question comes from . You may ask you question and please state your company name.

Yes, with Heartland Funds. Good afternoon. Say, I missed the - you mentioned that you bought stock back during the quarter, is that correct?

That is correct.

Over and above the convertible buy-back.

That is, right, that is correct.

OK. And what's the authorization then and your intent going forward?

This initial authorization was for $5 million worth of stock -

We purchased approximately $2 million against that. So there's still a $3 million availability. And when it makes sense, when it's a good investment in Nabi stocks, and we have the cash .

OK. That's all I had. Thank you very much.

Thank you, Bill.

At this time, sir, I'm showing no further questions. Once again, if you would like to ask a question, please press star, one on your touch-tone phone.

OK. With that, let's wrap us the Q&A session. Thank you very much for your interest and support in Nabi Biopharmaceuticals . This is an exciting time for us and I look forward to updating you on our continued progress in July. The telephone replay of today's conference call for US callers will be available through 5 p.m. Eastern Time, May 1, 2002. And can be addressed by dialing 1-888-395-1810. That is 1-888-395-1810.

For international callers, the conference call replay will be available through 5 p.m., May 1, 2002, by dialing 1-402-220-4753. Again, for international callers, 1-402-220-4753. In addition, an audio replay of today's call will be available on the Internet and can be accessed from Nabi Biopharmaceuticals . Our website is www.nabi.com or at www.companyboardroom.com, through 5 p.m. Eastern Time on May 1, 2002. Again, thank you very much for joining us. Bye, bye.

That concludes today's conference call. You may disconnect at this time.

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