Vaxart Inc (VXRT) 2002 Q4 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Nabi Biopharmaceuticals sponsored fourth quarter and 2002 year end conference call. At this time I would like to inform you this is conference is being recorded and that all participants are in a listen only mode. At the request of the company we will open the conference up for questions and answers following the presentation. I will now turn the conference over to Mr. Mark Soufleris. Sir, the floor is yours.

Good afternoon and welcome to Nabi BioPharmaceuticals conference call and webcast to review 2002 fourth quarter and year end earnings results. Before we begin I would like to remind you that remarks made in this conference call and webcast may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please be cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary materially from those in the forward-looking statements as a result of any number of factors, including but not limited to risks relating to the costs of research and development, the company's dependence upon third parties to manufacture its products, the impact of current industry supply and demand factors on the company and its products, the future sales growth prospects for the company's biopharmaceutical products, and the likelihood that any product in the company's research pipeline can receive regulatory approval in the United States or abroad or be successfully developed, manufactured and marketed. Such risk factors are disclosed more fully in Nabi Biopharmaceuticals' most recent form 10(K) 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, February 19, 2003. Any redistribution, retransmission or rebroadcast of this call or the webcast in any form without the express written consent of Nabi Biopharmaceuticals is prohibited. I will now turn the conference call over to David J. Gury, Chairman and CEO of Nabi Biopharmaceuticals.

Thank you very much, Mark, and thank you all for joining us to discuss our fourth quarter and year end 2002 results. Joining me this afternoon is Tom McClain, our President and COO, and Mark Smith, our Senior VP of Finance and Chief Financial Officer. I would like to start off with a review of the year's significant development and some of our key 2003 goals. Tom and Mark will then go on to discuss key financial and operating results for the year and comment further on our expectations for 2003.

Let me begin by saying that 2002 was a great year for us. We made tremendous progress in redefining our company as Nabi Biopharmaceuticals and we are well on our way to becoming a leading immune therapy company. Our 2002 results prove that our operating strategy is working. We achieved record-breaking sales for our biopharmaceutical products in 2002 that funded significant advancements in our extensive product pipeline. Our company's vision is to unlock and power the human immune system to help people with serious unmet medical needs. This aligns with our strong scientific and technical expertise with human immune responses. Our business approach is innovative, we are applying proven technologies for conjugate vaccines and antibody therapies in new and novel areas to attack major health care problems such as serious bacterial infections, hepatitis and nicotine addictions. Our business approach is assured that we have the financial strength to support our plans for growth and we are achieving our strategic business objectives. We also developed the business expertise and discipline needed to insure that we are successfully execute against our plan. That business discipline is centered on a three-prong strategy to build long-term value to our shareholders. First, we will continue to leverage the cash flow from current operations to fund the research and development for our rich and deep pipeline. Second, we will continue to build our existing biopharmaceutical business by pursuing new markets and indications for our flagship product, Nabi HB. Finally, we will continue to accelerate activities to advance our product pipeline by developing new clinical trials and developing commercial vaccine manufacturing capacity.

We have accomplished several significant corporate milestones in 2002. First of all, we achieved record breaking sales of our biopharmaceutical products. To drive this growth, we developed the highest level of patient use of Nabi HB and WinRho in our history. The margins produced by these sales supported the growth in our R&D programs and all of our capital investments in 2002. During the year we further strengthened our financial position by repaying our convertible notes and eliminating all debt. Second, we began selling the Nabi-HB manufactured in our new Boca Raton facility one of the most advanced immune globulin manufacturing facilities in the world today.

Third, we successfully negotiated and signed four international distribution agreements to begin building a global presence for our flagship product, Nabi-HB. We believe there is a significant opportunity to market Nabi-HB outside the United States.

Fourth, we filed a BLA for the use of Nabi-HB intravenous in liver transplant patients, a significant achievement for the company. The FDA has granted the BLA a priority review and Nabi-HB intravenous has received orphan drug designation for this indication.

Five, we completed the transfer of StaphVax clinical lot manufacturing to DOW, our contract manufacturer, and successfully produced the first lot of clinical material in their plant. We also successfully completed proof of concept runs at commercial scale for the two most critical processes in manufacturing StaphVax at DOW.

Six, we completed and announced results from our StaphVax booster trial in ES. RD patients and the results clearly suggest that our vaccine has a strong boosting effect, an important results for certain patient populations may be at chronic risk for infection. This result combined with the results from our first Phase III clinical trial was critical for completing the planning for our confirmatory Phase III StaphVax trial that is planned to begin in the second half of this year.

Seven, we also achieved great progress in advancing human clinical trials for our other development programs starting with the successful initiation of our Civacir trial in liver transplant patients. We completed enrollment for this trial in 2002. Also the FDA granted us orphan drug designation for this product, meaning it will have a period of marketing exclusivity for seven years for treating hepatitis C liver transplant patients when it is approved.

Eight, we successfully initiated and completed our first clinical study of NicVax, our novel vaccine in fighting nicotine addiction. The encouraging preliminary results from this Phase I safety study clearly demonstrated that NicVax was safe and subjects dosed with the vaccine developed nicotine specific antibodies, thus paving the way for continued clinical trial were development.

Nine, and finally, we promoted Tom McClain to president and chief operating officer of the company and added Dan Greenleaf as senior vice-president of operations. With this we've continued to build and strengthen our senior management team.

I'd like to now turn to our key objectives for 2003. We have six strategic priorities for this year. First, we must continue to build value with our operating business. Second, we must advance the clinical trial program for StaphVax. Third, we must continue to advance both our internal and contract manufacturing capacities for vaccine manufacturing. Fourth, we must accomplish other important clinical milestones that include completing the reporting on the results from our Civacir trial in hepatitis C. liver transplant patients, initiating a new Phase II Altastaph trial in low birth weight infant and completing the enrollment for our NicVax trial in smokers, that is being conducted at the University of Maastricht in the Netherlands and was announced previously today as well as initiating a second NicVax trial in smokers, this time in the United States. Fifth, we must execute on business development opportunities that can provide us with incremental cash returns and additional capabilities to advance our product pipeline. And, finally, we will continue to develop and build strong leadership in a corporate culture that is committed to quality, values, integrity and the highest ethics in everything that we do.

In summary, 2002 was a great first year at Nabi Biopharmaceuticals. As I look forward to 2003 I am confident that we have the necessary experience, the business strategy, the financial strength and the management team to successfully execute our business plan and further build long-term shareholder value.

I would like to now ask Tom McClain to provide further comment on the company's operations and our plans for 2003. Tom?

Thank you. As Dave just described, we are very proud of our success in meeting key business objectives in 2002. The major focus for operations was to generate increased cash margins from biopharmaceutical product sales to support increased spending on our important R&D programs. And we successfully achieved that goal. There were several key factors that contributed to that achievement. Most significantly, we drove impressive gains in the use of our biopharmaceutical products at the patient or end-user level throughout 2002. This letter to the highest sales of biopharmaceutical products in our history, an increase of 22% from 2001. This unprecedented success in biopharmaceutical product sales reflects the outstanding capabilities of our 40-person hospital-based sales force and our sales and marketing staff.

The most significant contributor to this record performance continued to be Nabi-HB, our flagship product. Sales of Nabi-HB increased significantly over the same period in 2001, supported by record patient use of this product which was up by 13% from 2001 levels. As we look forward, we see additional opportunities to continue to build our Nabi-HB franchise. We are aggressively pursuing new markets and new applications for this product. As Dave indicated earlier, we learned from the FDA in January that our BLA for Nabi-HB intravenous was accepted by the FDA and has been granted priority review. This means that the FDA will respond to us regarding the submission within a six-month period rather than the normal ten to 12 months. Nabi-HB was also granted orphan drug status for its use in liver transplant patients during the year. In addition, we are continuing to pursue distribution agreements for Nabi-HB in countries outside the U.S. During this past year we signed four such agreements. We expect to begin recording sales under these agreements upon regulatory approval in these markets in the second half of 2003 or early 2004. To give further drive to non-U.S. sales of Nabi-HB, we are also preparing to file directly for registration in individual countries where we believe we can build a market for this product.

Another area of continued emphasis for us is increasing the utilization of our biopharmaceutical manufacturing plant. Certainly the best way to do this is driving growth in sales of Nabi-HB which is manufactured in our plant. The international distribution agreements that we previously announced, continued strengthening of product sales in the United States and approval for the IV BLA are expected to drive increased utilization of the plant in 2003. In addition, we will continue to seek opportunities for manufacturing products on behalf of other companies in our plant in 2003 and beyond.

The management in our antibody collection operations also achieved great success in 2002 by focusing on improving efficiencies in plasma operations at the centers. Those team efforts resulted in a 31% increase in plasma production for the year. Importantly, specialty plasma production at our centers has increased to almost 50% of total plasma production for the year. For the near term, specialty plasma production benefits us because these sales generate a higher margin and therefore a higher cash return. Our strength in specialty plasma production is also vital to the long-term success of our business strategy by providing the raw material for Nabi-HB, WinRho, Civacir and Altastaph. Shifting now to our product pipeline, our major focus continues to be on hospital-acquired staph aureous bacterial infections. Staff and Altastaph are both being developed to address this serious unmet medical need. I am pleased to report that we have successfully transferred our technology for producing clinical sale lots of StaphVax to our manufacturing partner, DOW Pharmaceutical Contract Manufacturing Services. We are currently preparing to fill the first clinical lot of StaphVax manufactured at DOW. We plan to begin an immunogenicity study with this vaccine during the second quarter of 2003. With good results, that will allow us to begin the confirmatory Phase III trial of StaphVax during the second half of this year. In fact, this week the protocol for the confirmatory Phase III clinical trial will be submitted to the FDA for final review and comment. That comes after a series of productive discussions with the agency. The trial design anticipates the reduction of infections from a single injection of StaphVax through eight months as the primary endpoint. The design also includes a booster dose of vaccine to be administered at eight months. We will continue to follow patients for an additional four to six months after the booster dose to evaluate any further reduction in infections as secondary endpoints.

We also successfully achieved another milestone in developing commercial scale manufacturing for StaphVax in 2002. We completed the proof of concept for the fermentation and purification of both the carrier protein and the staph polysaccharide antigen. These are the most complex steps in the manufacturing process at full commercial scale at DOW. We will next use these purified intermediates to produce vaccine conjugates at commercial scale. This important progress is in line with our plans to begin the manufacturing of StaphVax consistency lots at DOW in 2004. Based on these time lines, we continue to project filing a BLA for StaphVax by yearend 2005.

I am also pleased to report that we have successfully completed a pharmaco-economic study at Duke University, evaluating the cost of staphaureus bloodstream infection in patients undergoing chemodialysis. These results are being prepared for presentation at a scientific meeting and for publications later this year. These results will also be important for developing comprehensive marketing models for StaphVax.

We will also advance other programs in a gram-positive infections area in 2003. First, with the continuation of our Phase I, II clinical trial with Altastaph in adults with persistent staphaureus bloodstream infections and, second, with the initiation of a Phase II clinical trial in low birthweight newborns planned to begin mid-year. A successful outcome from the Phase II trial in newborns is expected to lead to a full Phase III trial of the product in this patient population next year.

We also achieved significant progress with the other products in our development pipeline in 2002. In 2003 we plan to report on the results from the NIH-sponsored Civacir trial in liver transplant patients. And we are also very excited about today's announcement that we have begun our second NicVax clinical trial. We are excited for two reasons. First, this trial is the first test of NicVax in a smoking population and, second, it represents the first clinical trial we have managed outside of the United States. We plan to begin an additional NicVax clinical trial in smokers and ex-smokers in the United States later this year. This trial will be funded in part by our grant from NIDA, the National Institute On Drug Abuse.

As we have previously stated, our goals for leveraging the cash return from our current operations and infrastructure also include product acquisition and in-licensing opportunities. We built a solid biopharmaceutical business through successful product acquisitions and we continue to work diligently to add one or more products to our portfolio between now and the launch of StaphVax. By acquiring additional products we believe we can further increase the return from our proven sales and marketing infrastructure. Partnering of our pipeline products continues to be an important focus of our business development activities. We remain committed to finding the right partners for our product development programs. We continue to devote significant time and energy to this effort and, while we will not set an expectation about when we would complete apart nearing agreement we, I can assure you this remains an important priority.

I would like to conclude my remarks by acknowledging the contributions of our employees and our management team. Nabi Biopharmaceuticals has made a significant strategic transition over the last 18 months. Without the enthusiastic commitment of our team and their efforts to build a company that is focused on our values on being customer-driven, results-oriented, team-centered, learning-focused and change-ready, we could not have achieved this record year of success. Thank you for your dedication and your efforts in 2002.

I also know that strong leadership is critical to the growth and success of our company. With that in mind we can continuing to strengthen and build our management team, both by developing leaders from win and by making key additions to the company. Dan Greenleaf, our new Senior VP of Operations joined us in November from Schering-Plough Corporation where he was Vice President Marketing And sales. Today I am also pleased to announce the addition of Dr. Henrick Rasmussen as VP of Clinical and Regulatory Affairs. Dr. Rasmussen joins us from GenVec where he was Senior VP of Clinical and Regulatory Affairs. He also spent several years with Phizer, ultimately becoming a leader and study director in their cardiovascular section. Our clinical study capabilities have also been further strengthened by the addition of Dr. Matthew [Hoboken] who joined Nabi from GlaxoSmithKline as senior director of clinical research. Dr. Hoboken will lead our StaphVax clinical programs. Dr. Argen Devos has also joined us as senior director of clinical research and will lead the clinical development of our NicVax program. And finally, Dr. Pamela Harris has joined the company as director of clinical research and will lead our Altastaph and Civacir clinical programs. Each of these professionals brings not only strong pharmaceutical company experience but also brings the leadership standards that align with our company values, the Nabi way. I am pleased that they have joined our team and I know that they will be instrumental in helping to drive our strategic and tactical success over the next several years.

In closing, our operating performance was very strong in 2002 and we expect that it will continue to drive the important investment in our R&D programs this year and in the future. Our business strategy is clearly focused on key priorities. We are strong financially and we have a talented and capable management team that is going to lead us to new successes in 2003.

Now I would like to introduce Mark Smith, who will review our financial performance in 2002 and our 2003 expectations.

Thank you, Tom. As Dave and Tom have discussed, Nabi Biopharmaceuticals achieved a very strong operating performance for the full year and fourth quarter of 2002 driven by record biopharmaceutical product sales. This operating results generated the cash return to funds our R&D program, fund our capital spending requirements and allowed us to end the year with almost $52 million in cash and cash equivalent on hand. Likewise earnings on biopharmaceutical product sales we reported net income of $2.1 million, or five cents per share on a diluted basis for fiscal year 2002. Net income was $1.1 million within the fourth quarter of 2002. These results were in line with external expectations.

Total annual sales comprised of biopharmaceutical product sales and antibody product sales were $196 million. For the fourth quarter total sales were $58.1 million. Sales of biopharmaceutical products were $89 million in 2002; 22% above 2001 levels of $74 million. Commencing with this report we will report individual product annual sales information for our lead biopharmaceutical products, Nabi-HB and WinRho SDF. As Tom has described, increases in biopharmaceutical sales were driven by higher sales of our lead product, Nabi-HB, which increased 36% to $41.2 million in 2002, from $30.3 million in 2001. This increase was the combined result of increased patient demand and replenishing distribution channel inventories with products manufactured in our Boca Raton facility. These increased sales are significant to us as Nabi-HB is our highest margin product. Sales of WinRho SDF was $34 million in 2002 compared to $34.8 million in 2001. Patient demand for this product was at record levels in 2002. Increased patient demand and continued reliable product supply from the manufacturer in 2002 resulted in low inventory levels in the distribution channels at the end of 2002. Improved product supply from the manufacturers led to higher sales of Autoplex T and Aloprim for the full year of 2002. In the fourth quarter, however, sales of Aloprim were again negatively impacted by limited product supply from the manufacturer. Overall, fourth quarter for our biopharmaceutical product sales were 11% higher in 2002 compared to 2001.

Antibody sales were $107 million in 2002; a decrease from prior year levels was expected and reflects the sale of the majority of the antibody collection business in September, 2001. Of the $74 million in non-specific antibody sales reported in 2002, $56 million went to a single customer under an arrangement whereby we purchased plasma from the acquirer as the majority of the antibody collection business and then sell the plasma to our customer at no margin. We report revenue under this arrangement because we retained the credit risk from the end customer. This arrangement ends in May, 2003. Sales from our own plasma collection centers totaled $18 million in 2002.

Antibody sales were $30 million in the fourth quarter of 2002, compared to $29.7 million in the fourth quarter of 2001. Fourth quarter 2001 results benefitted from $3.8 million recorded following an arbitration settlement with Baxter relating to plasma supply in an earlier period resulting in a one time gain. Gross margin was $64 million for the full year 2002. This represented a gross margin percentage of 33% in 2002, compared to 30% in the prior year, reflecting the greater proportion of higher margin biopharmaceutical sales in 2002. Gross margin in 2002 included approximately $3.5 million of excess plant capacity costs compared to $1.2 million in 2001. The plant came on line in October, 2001. In its initial periods of operation the manufacturing capacity of the plant will not be fully utilized resulting in excess capacity cost. Excess capacity cost in 2002 were incurred over the full year compared to just the fourth quarter in 2001. In the fourth quarter of 2002, excess capacity costs were approximately $100,000, reflecting increased production primarily from Nabi-HB. Gross margin in Q4 2002 was $17.8 million, or 31%, compared to $22.4 million, or 41%, in Q4 2001. Gross margin in Q4 2001 benefited from the arbitration settlement of $3.8 million related to the antibody business noted earlier for which there was no offsetting cost, and receipt of a penalty from the manufacturer of Autoplex T in the amount of $1.5 million. This penalty compared to approximately $100,000 in the fourth quarter of 2002. As we have described before in the periods when the manufacturer of Autoplex T fails to provide its contracted product minimum they must pay us a penalty for lost margin. As noted earlier product supply of Autoplex T improved in the fourth quarter of 2002 resulting in higher sales and inventory being available for the sale in Q1 2003.

Operating results included a $5.8 million increase in research and development expense in 2002 compared to 2001. Research and development costs were driven by the investment in Nabi Biopharmaceuticals gram-positive, Civacir and NicVax programs as well as cost to prepare and file our BLA for Nabi-HB intravenous. Selling general and administration expenses were approximately 5% lower in 2002 compared to 2001. Lower SG&A costs reflect headcount reductions following the sale of the majority of the antibody collection business. In addition, we also received payments from the acquirer of the majority of the antibody collection business for providing administrative and support services in 2002 that were recorded as an offset to SG&A expense. Offsetting the benefit of these expense reductions and offset were the impact of increased insurance and consulting costs in 2002. Nabi Biopharmaceuticals' full year 2002 provision for income taxes was $615,000 for an effective tax rate of 23%. This rate differs from statutory rates due to utilization of tax credits, primarily research and development tax credit.

Now turning to our overall financial position. In communicating our operating strategy to you over the past year, we have emphasized that we would generate the cash from operations to fund the R&D and capital spending. At December 28, 2002 we had almost $52 million in cash on hand, net assets of $189 million and no outstanding debt. In 2002, after settlement of all our outstanding debt during the year, we used less than $1 million for the sum of operating, investing and non-debt relating financing activity. We believe this demonstrates the financial strength of our operations and our ability to continue to support of our key R&D programs. It also supports our ability to pursue the strategic acquisition or in-licensing of additional biopharmaceutical products. We expect further strengthen in our overall financial position in 2003 by entering into a new credit facility.

Looking ahead to our 2003 operations we expect to again be profitable from current operations for the full year 2003. As in 2002 we may incur losses in certain quarters including the first quarter due to the timing of research and development spending. We expect an overall increase of biopharmaceutical sales of approximately 5% from 2002 levels. This overall rate of growth is less than 2002. Projected sales growth from biopharmaceutical products is expected to be led by WinRho SDF which is expected to grow at a double-digit rate. Also related to Nabi-HB we have not projected further increase in hepatitis B liver transplants beyond fourth quarter 2002 levels. We do anticipate continued supply issues for Aitoplex T and Aloprim. Antibody sales in 2003 are expected to be approximately 70% of 2002 levels. This planned decrease reflects expiration of the sales arrangement with a single customer in May 2003 described earlier under which we reported $56 million in sales in 2002 but earned no margin. Driven by higher levels of demand to Nabi-HB utilization of the plant is expected to increase for the full year 2003 compared to last year. This increased utilization is expected to limit excess plant capacity cost to approximately $2 million. Overall, we expect to generate a gross margin in excess of $65 million.

Research and development spending is expected to increase over 30% in 2003 from 2002 levels. Driven by cost to establish the manufacturing process at commercial scale and commence our conservatory Phase III clinical trial of StaphVax. Other significant efforts will include commencing a Phase II trial for Alphastaph for low birth-weight new borns and clinical trial activity for NixVax here and in Europe. Selling, general and administrative spending is planned to be approximately 5% lower in 2003 than in 2002 levels. We project our effective cash rate will be approximately 30% in 2003 as we continue to utilize R&D tax credits. Capital spending in 2003 is expected to total approximately $8 million, primarily for the construction of laboratory and freezer storage on our Boca Raton site. This facility will replace our leased facility in Miami. In addition, we expect to incur significant additional expenditures for the acquisition of the manufacturing rights at DOW's facility. As a reminder, this right represents our secured use of that facility for the future commercial manufacture of StaphVax. Our current agreement with DOW has been extended to March of this year. We anticipate concluding an amendment to this agreement extending its term until the facility is ready for the commercial manufacturer of StaphVax.

Now let me turn things back to Dave Gury.

Great. Thank you very much, Mark and Tom. A lot of background but at this time I would like to open up for questions. Jennifer, if you could.

Yes, sir. Thank you. The question and answer session will begin at this time. If you are using a speakerphone please pick up the hand sit before pressing the numbers. Should you have a question please press star one on your push button telephone. If you wish to withdraw your question please press star two. Your question will be taken in the order it is received. Please stand by for your first question.

Our first question comes from Tom Schrader of GKM. Please pose your question.

Hi, how are you?

Good, Tom, how are you?

Good. I have one financial question. I just want to make sure I understood what you were saying about StaphVax. So for the first large lot you are saying you've made peptide and polysaccharide and you still have to hook them together, is that it?

That's correct, Tom.

That would be the material for the immunogenicity study as well as the Phase III trial?

No, for the immunogenicity study in the Phase III trial we've made a lot of material at clinical lot scale at the same time that we were completing the proof of concept for the commercial scale manufacture.

Okay. So you have the material for the trial?

We have the material made. It's ready to be filled. And with the filled product we would expect to begin that immunogenicity study in the second quarter. And then with a good outcome from that immunogenicity study that would allow us to begin the confirmatory Phase III trial in the second half of the year.

I guess, sorry to be dense but why are you waiting if you have the material?

We just completed manufacturing of the clinical lot at the end of the year.

Okay.

Now we need to have it on stability and have the product filled. And when that's completed then we can take the steps to initiate the immunogenicity study.

Then you just make two more large lots for consistency?

We will make three large consistency lots. And with the proof of concept we believe that we are on track to begin that process next year.

And the consistency lots will be made during the process of that confirmatory Phase III trial.

You would hope some day to sell those, is that the point?

That could be possible in new products.

And the immunogenicity trial, approximately what's involved there?

It's going to be a trial in a small population of patients and what we want to see is that the vaccine manufactured at DOW raises a comparable level of antibodies to the vaccine that we had previously manufactured in our research and development plan, our pilot plan.

So you are really only waiting for peak levels to get up to what you believe is protective?

Right. We want to see that they will stimulate a similar level of antibody.

Okay. Can you repeat the WinRho numbers again? I just missed them.

WinRho?

If you can repeat Nabi and WinRho, just to make sure I've got them right. We've been guessing all these years.

For Nabi-HB I will start with, that was $41.2 million for the full year 2002.

Okay.

And compared to $30.3 million. And WinRho was $34 million in 2002 compared to $34.8 million for 2001.

Okay. And we can, just remind me, the royalty expenses, is that on a quarter delay?

We accrue it in the current quarter but it is, it's ordinarily paid.

The cash flow is quarterly.

Yeah it's accrued in the quarter we report the sale. It is paid to Cangene in the period we are paid by our customer.

Let me, so you are telling us the royalty rate basically?

Well, the royalty rate is a, sharing the profit equally between us and Cangene as relates to WinRho.

Okay. Good. Then the last question, it looks like you have this enormous cost of goods sold number. Do you have a large plasma transfer cost this quarter? You have $37 million in cost of goods sold.

That is correct. I think we reported at the end, if you look at the numbers at the end of the third quarter there was a build-up in some of our plasma inventory which we reflected with sell in the fourth quarter, and there was that, that's right, those transactions took place. While that, as we reported that isn't significant in terms of gross margin, the significant is that we didn't turn that inventory into cash.

It's something like $10 million?

The other thing that happened, Tom, as well is last year we didn't have sufficient inventory of Autoplex T to sell. So we recorded a benefit for that. This year we had product on hand so we had both sales and cost of sales.

Okay. Gotcha Thanks a lot and congratulations. Thanks for answering all the questions.

Our next question comes from Sydney Velez of White Mountain Capital. Sir, please pose your question.

Good afternoon, gentlemen. Sounds like you had a good year.

Thank you.

Also, thanks for the breakdown on the individual product sales. That's very much appreciated. I have a question regarding international sales of Nabi-HB. You mentioned that you attribute at least in part the success of the Nabi-HB sales domestically to the success of your sales staff. That's obvious. But what plans do you have for international sales staff? Just trying to get an idea of what we might be able to expect as far as a ramp-up as far as international sales of the drug.

Our expectation is that international sales will be made through distributors and therefore the distributor arrangements that the four agreements that we announced in the last year, the ramp-up really requires us to go through in most cases individual country registrations and so we will be completing that process this year. And we will begin to see the benefit from international sales of Nabi-HB toward the end of '03.

Okay. And I'm sorry, if you could go over potential Civacir milestones for '03 one more time, please.

We expect to announce the results of the Phase I, II study of Civacir this year and it's with those results that we would understand how to proceed with planning a Phase III study and we have not established a firm timeline for when that study would begin.

Lastly, you seem to be stressing the possible acquisition of products more than you have in the past. Did you have, number one, did you have any idea of more specific time frame of when that might occur and secondarily, what type of product would you be looking for, would you be looking for an antibody product or would you be looking to diversify the products a little bit more?

We certainly are looking for good product opportunities. We've had a great success with the products that we've acquired. Our first objective would be looking for product with synergies within our operations today and ideally a product that fits well with our call pattern but also would utilize some of the manufacturing capacity that we have here in the plant. So we would be interested in immunoglobulin products. At the same time, though, we are very cognizant of building the sales and marketing capabilities for building the products in the pipeline and if we find other products that would bring us into the physicians' offices who will be important to StaphVax and to Altastaph and to Civacir, we would be very interested in those opportunities as well.

Okay. Thank you. That's all I have.

Thanks.

As a reminder, ladies and gentlemen, should you have a question please press star one on your push button telephone. If you wish to withdraw your question please press star two. Our next question comes from Tom Schrader of GKM. Please pose your question.

Okay. I have one more that I don't understand. Just walk me through real quick why Nabi-HB is up 30% this year but you say next year is flat and WinRho is flat this year but you predict a significant increase. Can you give any more color there? What's going on?

From an operational standpoint with WinRho?

Okay.

We have customers that built inventories of the product in 2001 and that's because we had supply interruption from the manufacturer in 2000. So inventories at the end of the year at those customers were higher because they wanted to assure supply. This year with the certain manufacturing supply we were able to work with those customers and reduce those inventories by the end of the year. And so now as we look forward to 2003, we will fully benefit from all of the increase in patient demand that we're able to build and that will drive the double-digit sales growth that we expect in 2003.

Okay.

In the case of Nabi-HB, the sales of that product are largely driven by the number of Hepatitis B liver transplants. And we benefited from increased transplants in 2002. As we look at our projections and at setting spending levels in the R&D area, we are projecting that liver transplant levels will maintain themselves at year end 2002 levels but we've not projected further increases in liver transplants in the U.S. market. So that's why we are not seeing the same kind of significant increase projected for Nabi-HB sales in 2003.

And you are really not, you are really not predicting anything now from your partnerships for this year. Is that?

That's correct because we've not secured the registration of Nabi-HB in those countries yet. Again, for setting our R&D spending levels and other investment decisions, we've not factored non-U.S. sales into our projections for the year.

Okay. One last question on Civacir, is orphan drug important there or do you have hope of method-of-use patents that would actual will be much more powerful.

Well, we certainly are going to do everything we can to substantiate our position with the product. But orphan drug status is certainly an excellent way to gain market exclusivity for a seven-year period. But we will absolutely look for other opportunities, either through licensing or through establishing our own technology positions to protect our Civacir know-how.

So there are some claims out there already?

Well, there are - obviously in the hepatitis C area with anything you do that involves assays and that type of work there are a couple of companies that you need to be talking with.

Right. Okay. Thanks again.

Our next question comes from Sydney Velez of White Mountain Capital. Please pose your question.

Back again, sorry about that. One more question about the endpoint of the StaphVax trial. I take it that that is not finalized yet but you didn't mention that the eight-month time point was in the design of the trial. Is that something that you've had substantial discussion with the FDA about or is that something that's still slightly up in the air? That would appear to be perhaps the most favorable time point at which to analyze the data for you. Is that the case?

That is correct. That is when the when we had the peak response to the vaccine in the first Phase III clinical trial. And what I said was that the eight-month reduction of infection would be the primary endpoint point in the design of the trial, the final design that we are sending into the FDA. And, yes, discussions about endpoints have been a significant topic in the back and forth discussions that we've had with the FDA over the last several months.

Okay. So this time-point has been arrived at for substantial discussions.

Yes.

Thank you very much. That answers the question.

Our next question comes from Jason [] of [inaudible] Equities. Please pose your question.

Hi, gentlemen, nice quarter again. Tom, can you discuss the strategy behind NicVax trials going to a Phase I,II in Europe first and then coming back to the U.S. And can you discuss the time line that you are going to start seeking IRBs for StaphVax and would that be U.S. IRB.s only? Thanks.

Sure, with NicVax it's a product that certainly has huge global potential and with the trial in the Netherlands we had an opportunity to begin doing dosing studies in patients who are subjects who smoke as well as ex-smokers. So for us it presented a unique opportunity to initiate dose ranging studies in those subject populations. What we are doing then with those results is, and that will be actually a study that will look at different dosages of the vaccine and assess the immune response. What we will also do then is begin a different dosing regimen in a U.S. study that will be funded by NIDA. The strategy here is to were develop as much safety and as much data about the immune response as we can in as short a period of time as we can so that we are quickly able to determine what the value of that technology will be for us in the future.

Okay. Great. And as far as when you are going to be seeking IRBs for StaphVax?

In StaphVax we are in discussions with the clinical research organizations who will be affiliated with the trial. And we would expect to be in more, more discussions with individual sites and locations as we progress through the first quarter.

Are you going to go after the same sites that did the previous Phase III and, if so, have they learned anything from the previous Phase III that might help the final Phase III hopefully? And are you worried that the incidence of infection might have come down which would make the endpoint harder to achieve?

We are looking at other sites for the confirmatory Phase III trial. Certainly the size of the trial is much larger so it wouldn't be sufficient to just go back to the sites that we used before. So we will be looking at different locations. Secondly, I won't speak about [Kaiser] but I know with learned a great deal from the first Phase III clinical trial and as we looked at design and we look at enrollment and we look at opportunities to optimize the duration of the study, we will build all of that learning into the process for conducting the next Phase III clinical trial.

That will be an all-U.S. trial?

At this point it would appear to be all U.S. though we have not completely ruled out using some nonU.S. sites in that study. It's just too early for me to say definitely.

Tom, my last question is related maybe for Mark, to gross margins, Mark, can you, will you break out the gross margins for biopharmaceutical sales only excluding plasma sales?

At this time we've gone with the margin break out we have. We have improved, or increased our disclosure with breaking out the revenues from the biopharmaceutical products. I think the guidance we've given in the past and we would stick with is that the substantial portion of our gross margin is driven from the biopharmaceutical business. We will certainly consider what future additional disclosures but for right now that's where we are.

Okay.

What I would suggest you do is you wait to see our 10(K) report where we do report the income statement by segment, biopharmaceutical and plasma, and also pay very close attention to our disclosure of the plasma sales under that contract that occur at zero margin. So that you could understand how essentially to back that out when that arrangement concludes in May of 2003.

Right. Thank you, guys.

Thanks, Jason.

Ladies and gentlemen, should you have a question please press star one on your push button telephone. If you wish to withdraw your question, please press star two. If there are no further questions I will now turn the conference back to Mr. Gury.

Thank you very much. It's been a long afternoon. I appreciate your being there. I appreciate your continued interest in Nabi Biopharmaceuticals. A replay of this call will be available through February 26, 2003, at 5:00 p.m. eastern time. The replay may be addressed in the U.S. by dialing 1(800)428-6051, Internationally by dialing 1(973)709-2089, or through the web at WWW.companyboardroom.com, all one word. The pin for the call and web play is 282,295, that is 282,295. To repeat the call-in numbers in the United States are 1(800)428-6051, internationally, 1(973)709-2089 and threw the web, www.companyboardroom.com, the pin number is 282,295. Thank you very much.

Ladies and gentlemen, this concludes our conference for today. Thank you for your participation and have a great day. All parties may now disconnect.