Vaxart Inc (VXRT) 2004 Q2 法說會逐字稿

Good afternoon. My name is Amanda and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Nabi Biopharmaceuticals Q2 Earnings conference call. (Caller instructions)

As a reminder, ladies and gentlemen, this conference is being recorded today, July 20, 2004. I would now like to introduce Mr. Mark Soufleris, VP of Investor & Public Relations. Mr. Soufleris, you may begin your conference.

Good afternoon and welcome to the Nabi Biopharmaceuticals conference call and webcast to review our second quarter 2004 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 differ significantly from those in the forward-looking statements as a result of any number of factors, including, but not limited to, risks relating to the possibility that our confirmatory Phase III clinical trial for StaphVAX or our plans to commercialize StaphVAX in the EU may not be successful, the possibility that we may not realize the value of our acquisition of PhosLo, the Company’s dependence upon third parties to manufacture its products, the Company's ability to utilize the full capacity of its manufacturing facility, the impact on sales of Nabi-HB from patient treatment protocols and the number of liver transplants performed in HBV-positive patients, reliance on a small number of customers, the future sales growth prospects for the Company’s biopharmaceutical products, and the Company's ability to obtain regulatory approval for its products in the U.S. or abroad or to successfully develop, manufacture and market its products. These factors are more fully discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2003 filed with the Securities and Exchange Commission.

Information discussed in today’s call and webcast is time-sensitive and is accurate only as of today, July 20, 2004. Any redistribution, retransmission or rebroadcast of this call or the webcast in any form, without the express written consent of Nabi Biopharmaceuticals, is prohibited. A telephone replay of today’s conference call will be available through 5:00 PM Eastern Time on July 27, 2004. Information about how to access the telephone replay is available on our website, www.nabi.com. In addition, an audio replay of today’s call will be available on the Internet and can be accessed from Nabi Biopharmaceuticals’ web site www.nabi.com through 5:00 PM Eastern Time on July 27, 2004.

I will now turn the conference call over to Thomas H. McClain, Chairman, CEO and President of Nabi Biopharmaceuticals.

Mark, thank you.

In the context of today’s announcement, I would like follow a different approach for today’s conference call. We do not often discuss the importance of strategy and planning to our success as a company. But as I review the combination of financial and operational developments in our announcement this quarter and how we will manage and succeed as we move forward, that clearly demonstrates to me the value and the importance of our comprehensive strategic business plan and approach.

Our strategic plan is focused on the current year and the next three years. It balances business opportunities and risks with our goal of optimizing the return for our investors. It provides context for our business decision in terms of internal and external developments and it is based on solid market and financial analyses.

The result for us is a plan that we believe provides clear and realistic alternatives for achieving our most important business objectives. That plan is based on something we all know: Any team, any company, cannot realistically expect success 100% of the time. That reality is the driver for the scenario modeling that is core to our strategic planning.

Following an approach that considers probable outcomes - both upsides and downsides - enables us to build plans that can be executed even when something does not fall into place in the way we would expect or hope for. Today, I am first pleased to report that our record performance in the second quarter clearly demonstrated our ability to drive success in the sales and marketing of our biopharmaceutical products, to generate cash flow and to fund a significant increase in development spending.

The investment in our StaphVAX program, both for clinical trials and manufacturing, has more than doubled our R&D spending from the first half of 2003, and at the same time, we have generated a positive operating cash flow of approximately $5m through June. That is a key element of our strategic business approach and a basic discipline in how we are running our Company.

But today we also need to focus on how Nabi Biopharmaceuticals will react to a recent development that could have challenged our ability to successfully pursue that objective. In today’s financial and operational update we also reported that we have received notification from Cangene that, for strategic business reasons, they will not renew our U.S. distribution agreement for WinRho after it expires next March.

We had understood that this was a possibility and although Cangene has acknowledged that our performance and the results we delivered in successfully launching and developing the market for WinRho has met their expectations, other factors have led to this decision.

We had hoped for and expected a different outcome, but we also planned for this outcome. The actions we took over the last 12 months, the acquisition of PhosLo, developing commercial opportunities for PhosLo and Nabi-HB in Europe and globally, the equity financing in December - all of these will enable us to meet our strategic goals for completing the development of StaphVAX using operating cash flow with our without WinRho and to fund other important strategic initiatives.

I want to be clear on our development plans from the start. Despite Cangene’s decision, we are on track and we expect to continue to be on track with the key development programs and milestones that will result in the launch of StaphVAX, the important first product in our gram-positive infections program.

To meet my objectives for this afternoon’s communication, I would like to focus on three areas. First, the key factors in our record operating performance this quarter, focusing particularly on the excellent trends in sales of PhosLo and Nabi-HB that have led to raising our revenue projections for 2004. Second, to focus on WinRho and the Cangene decision and its impact on Nabi Biopharmaceuticals after March of 2005. And finally, to highlight the significant progress we continue to make with the StaphVAX program in Europe and the United States.

First, in focusing on our operational results in the quarter, our success in generating increased biopharmaceutical sales drove significant gains in gross margins and operating cash flow. A major factor in that success was the continued strong performance for PhosLo, which was acquired last August.

We continue to successfully execute against a well-constructed PhosLo S&M plan. That plan is capitalizing on the strong momentum that we gained with the initial relaunch of PhosLo last fall, with the initiation of a new S&M campaign this past January, and with the publication of the CARE study results in the second quarter.

The publication of the complete CARE study results in May underscores the strong clinical data supporting the first line use of PhosLo in treating elevated phosphate levels in end stage kidney disease patients. The fact that the study was published in a preeminent journal like Kidney International is important in emphasizing the strength of this data.

It is important to emphasize that the CARE study is not just the first, but it is so far the only randomized, double-blinded, controlled, head to head comparison between PhosLo and the competitive prescription product Renagel.

Since Nabi’s launch of PhosLo in September of last year, we have monitored IMS prescription data as an important indicator of our success in selling and marketing PhosLo. The trend in new prescriptions share, growing by almost 2%, is an important lead indicator for PhosLo’s performance and now we are starting to see the impact of our marketing and sales efforts on total prescription share as well.

But because certain channels do not report prescription or take-away data to IMS, we also track trade inventory levels. This is the only mechanism that allows us to account for sales through important channels like Wal-Mart, Target, and Rite-Aid that don’t report prescription data through IMS.

This internally compiled data indicates that inventory in fact decreased from five to six months at the end of the first quarter, to four to five months at the end of the second quarter. This is providing a strong indication of a significant uptake in PhosLo demand. That information, combined with several other factors, have led to increased expectations for PhosLo’s performance in 2004.

First, with the Braintree Label tablet inventory having essentially been exhausted in the trade, all prescriptions for PhosLo will be filled with Nabi-labeled product going forward. That, combined with evolving standards of care, our continuing education programs, the publication of the CARE study data - all these factors have resulted in increasing our guidance for revenues to $35-37m in 2004, up from previous projections of $32-35m.

We’ve also planned several other actions to balance incremental value in PhosLo in 2005 and beyond. Cardiac illness is the major contributor to death in end-stage kidney disease patients. That is why controlling serum phosphate and calcium phosphate product levels is so important. Current and emerging clinical data have supported their significance in improving cardiac health.

New studies and clinical evidence also stress the importance of cholesterol control, even when these patients have normal lipid levels. This was underscored as late as last week, as the National Cholesterol Education Program issued more aggressive guidelines for the treatment of cholesterol levels in high-risk patients, recommending that LDL levels should be kept at or below 70mg per deciliter in very high-risk patients.

These guidelines, we believe, will make treatment with a lipid-lowering agent required for the vast majority of ESRD patients. To evaluate PhosLo in combination with the most commonly used statin, Lipitor, we initiated the PRECISE study in June.

In line with this data and emerging clinical recommendations, the PRECISE trial has been designed to provide physicians with important new data on the combination of PhosLo plus a statin in treating these patients. In addition, the study is expected to demonstrate that the cost of this combination therapy will still be significantly lower than the cost of treatment with Renagel alone.

The K/DOQI Guidelines issued last year also recommend using calcium-based phosphate binders such as PhosLo to treat chronic kidney disease patients before they reach the dialysis stage. There is growing recognition that a substantial proportion of these patients could benefit from treatment with a phosphate binder.

However, none of the available phosphate binders are currently licensed for the pre-dialysis patient. Hence, we have developed a protocol to study the use of PhosLo in this setting and expect to discuss the trial design with the FDA during this quarter. We anticipate starting this study in the chronic kidney disease patient population later this year.

We are also preparing to file for approval for PhosLo in Europe. A briefing document was prepared and a meeting with regulators took place during the second quarter. Based on the positive outcome of this meeting, we expect to file our marketing authorization application for PhosLo by the end of 2004. And we expect to support our initial launch of PhosLo in Europe also by initiating a comparative study, PhosLo versus prescription calcium carbonate binders, in 2005.

In short, we believe the significance of the benefits of PhosLo, its proven safety and efficacy, and its significant cost advantages will be important to driving revenue growth in the U.S. market and expanding into new patient populations and important new markets in the future.

Moving now to Nabi-HB, we were very pleased by the improvement in results for Nabi-HB during our second quarter. As announced at our Analyst’s Day in June, we are encouraged by the strengthening in hepatis-B liver transplant trends that we have seen this year and as a result, we have increased our sales guidance for Nabi-HB in 2004.

We now expect to see growth of 8% to 10% year-over-year. Through our internal tracking of transplants, we expect final UNOS data will support a 10% to 20% increase in Hep-B liver transplants year-over-year. And in addition, we’re beginning to see some favorable developments for transplant reimbursement under Medicare that may increase the overall size of the market in the future.

Also encouraging in the second quarter, we have already seen reorders of Nabi-HB under the Novation agreement that was announced last March. This indicates that we are seeing successful pull-through of Nabi-HB from the initial sales under this contract. Novation is providing selling support and supplying finished Nabi-HB through its Novaplus private label program.

We believe that the Novaplus agreement will help Nabi Biopharmaceuticals expand its share of the hepatitis-B immune globulin market, particularly it’s use in the maintenance phase after liver transplant. All of these factors indicate a return to the pattern of growth that we have seen for this product and we are optimistic about a continuation of these trends in 2005.

We also completed an important step in the second quarter to further expand the global presence of Nabi-HB. We applied for the liver transplant indication via the mutual recognition procedure and our application has been accepted for review by the Paul-Ehrlich-Institut, one of the two regulatory agencies in Germany.

If positive, approval in Germany can then be used to seek approval in additional countries within the EU. Review and approval should be on a shortened timeline in those additional markets. In addition, because the filing in Europe was constructed in a common technical document format, this is an international format that can now be used as the basis for submissions to many countries worldwide without major modifications.

While important for Nabi-HB sales growth, this filing was also a very significant milestone for our Company. It marks the first regulatory step toward establishing a commercial presence for Nabi Biopharmaceuticals’ marketed and pipeline products in Europe. Nabi-HB Intravenous will be marketed to transplant surgeons in Europe. It has been specifically formulated for the prevention of Hep-B disease in HBV-positive liver transplant patients.

Upon the approval of Nabi-HB Intravenous, we will begin to leverage the successful specialty biopharmaceutical marketing model that we’ve used so successfully in the United States to develop our commercial presence within Europe. That presence will initially support Nabi-HB Intravenous, but ultimately support PhosLo and StaphVAX as well.

And one final note on Nabi-HB. As we reported at our Analyst’s Day in June, we received a full response letter on our U.S. BLA for the liver transplant indication from the FDA. The FDA has requested additional follow-up data from previously completed clinical trials. Earlier, we had supplied nine months of follow-up data.

The FDA has asked us to extend the follow-up period and to provide 12 months of data in patients treated with Nabi-HB alone and 24 months of data for those treated with a combination of Nabi-HB and antiviral therapy. It is important to remember that these trials have already been completed, more than 24 months ago. We are now in the process of gathering the available information. We expect to submit this additional information by the end of this year.

Turning now to our second area of focus for today’s call, WinRoh SDF, we had a strong quarter for WinRho, as sales were considerably ahead of last year’s comparable quarter. The driver for the timing of this YTD performance was a preannounced price increase in January of this year. This had resulted in high fourth quarter 2003 sales.

Because of consistent patient demand levels, trade inventories were reduced by the end of the second quarter and as a result, Q2 sales were higher. YTD unit sales are consistent with our estimates of patient demand and Mark Smith will provide more detail behind the sale information later.

I would like to take a moment, though, for some further comments on the Cangene decision. I first want to emphasize our primary focus in managing the transition over the next several months will be on the patients and the physicians who rely on this product. We have developed strong and important relationships in this market over the last ten years.

Because this product has become an essential first line therapy for patients with ITP, we want to make certain that our good working relationship with Cangene continues and that together we assure that medical needs are met. We continue to have a positive relationship with Cangene and we expect this to be a smooth transition. To achieve that goal, we are committed to align our sales performance to the patient demand we drive for WinRho and Cangene has assured us that it is committed to continue to supply product through next March.

While we were certainly disappointed by their decision, Cangene affirmed again last week that Nabi has been a successful business partner for the distribution of WinRho in the U.S. Our colleagues at Cangene describes this as a strategic decision, reflecting their board’s interest in licensing the product to a company fundamentally committed to plasma-based therapies.

With our strategic focus on adding vaccine products to our portfolio and a call plan that today reaches beyond hematology/oncology into nephrology and other specialty areas, they concluded that Nabi Biopharmaceuticals could no longer be that ideal partner.

Our path forward in 2005 certainly would have been easier with WinRho in our product portfolio, but, as I headlined earlier, we’ve already taken the actions that assure we can fund the development of StaphVAX using cash flow from operations. In 2003, we acquired PhosLo and we continue to significantly grow its sales and market potential in the United States.

We are also well positioned to benefit from Nabi-HB sales growth in the U.S. in 2004 and 2005 and beyond the U.S., we are taking the steps to build near-term incremental commercialization opportunities in Europe for both PhosLo and Nabi-HB. And further, we acquired the rights to Aloprim this quarter to maximize its value for Nabi.

In evaluating the effect of this change, there are some other important considerations I would like to highlight.

First, our 50-50 profit sharing arrangement with Cangene means that it takes $2.00 of WinRho sales to deliver the same gross margin benefit as $1.00 of PhosLo, Nabi-HB, or Aloprim sales. Second, we will continue to benefit from marketing WinRho SDF through the first quarter of 2004 and at the same time, the significant investment in our StaphVAX clinical trial will be completed by the end of the third quarter of 2005.

And finally, we maintain a significant cash balance that can be used for strategic investments in other opportunities to build operating cash flow and enhance shareholder value. These financial resources could also be used to accelerate development programs like Altastaph, beyond our capacity to invest using operating cash flow.

Turning now to my third objective for today’s call, our progress towards the approval and launch of StaphVAX, first with regard to the confirmatory Phase III clinical trial. We continued to make significant progress with enrollment in this trial during the quarter and I’m pleased to report that June was a record month for patient enrollment and we now have over 400 primary and secondly study sites onboard.

Clearly, by adding a fourth major site management organization to the study during the first quarter and through our success in quickly addressing challenges along the way, we are at enrollment levels that continue to support completing patient enrollment by the end of the third quarter of this year. And you’ll recall that meeting that target will assure that we are on track to complete the trial and to file our BLA in the United States by the end of 2005.

Another important milestone met during the quarter was initiation of the first in a series of additional clinical studies for StaphVAX. These are designed to provide evidence that a vaccine against these bacterial infections can raise high levels of antibodies capable of providing protection in other patients at risk for staph infections.

The target groups for these studies will be cardiovascular and orthopedic surgery patients in the United States and Europe. This first Phase IIB immunogenicity study will include a total of 200 patients from approximately ten of the leading cardiothoracic surgery centers in the United States. The study is designed to evaluate StaphVAX safety and antibody levels over a six-month period.

We expect these results to provide evidence that broader at-risk patient groups can achieve antibody levels equal to or greater than the levels proven to be protective in immune-compromised ESRD patients. We expect to initiate an additional study in the U.S. later this year, using vaccine manufactured at the Cambrex facility in Maryland. The European studies are expected to follow next year.

The results from the immunogenicity studies in the U.S. will not only be important in generating clinical data to support our BLA filing and a supplement to our European marketing authorization application in 2005, but they will also help us build a broader awareness of StaphVAX among key physicians and thought leaders in these other treatment areas.

Another milestone for the second quarter is our significant progress with the manufacturing of three StaphVAX consistency lots at Cambrex. This manufacturing will determine the timing of filing our license submission in Europe later this year.

Our progress at Cambrex continued to advance significantly during the quarter and we have now successfully completed the fermentation, the purification, and the conjugation steps for both the Type 5 and Type 8 antibodies. Formulation of the three consistency lots is now underway and filling of the vaccine will follow. Based on this rapid progress, we continue to anticipate completing the consistency lots in time to allow us to file the MAA in the EU by the end of the year.

Also, based on the significant progress with Cambrex, we have taken another very important step in our partnership. We actually initiated production of the first commercial lots of StaphVAX in their facility in the second quarter. We’ve also made good progress in compiling the documentation that is required for filing the marketing authorization application with the EU by the end of this year, as well as the biologic license application in the U.S. by the end of 2005.

And as a final note, we recently announced that we have begun construction of our own vaccine manufacturing facility. This facility is being constructed within existing shelf space in our currently licensed biopharmaceutical manufacturing plant in Boca Raton, Florida. It will not only help to support the commercialization of StaphVAX, but it is also ideally suited for the production of the other vaccines to address the most dangerous hospital-acquired gram-positive bacteria, as well as our NicVAX vaccine for smoking cessation.

All of this record progress toward the regulatory filings and the manufacturing for StaphVAX are a good lead-in for an update on our efforts for commercializing our products in Europe.

We continue to build the foundation for our European commercialization plans through a wholly owned subsidiary that has been established in Ireland. We’ve begun forming relationships with key opinion leaders in the countries where we initially plan on marketing these products, including an important StaphVAX Scientific and Clinical Advisory Board meeting that was held early in the quarter.

We have advanced the development of pharmacoeconomic analyses and reimbursement strategies that will be important to the successful launch of StaphVAX. We are recruiting key hires in the clinical regulatory reimbursement and commercial areas and we are also focused on building a sales force presence by following two strategies simultaneously. We are evaluating contract sales force providers, while at the same time we continue to analyze opportunities to establish a commercial presence in selected markets through acquisitions.

Because our timing is running short, I would like to simply point out that we have also made excellent progress toward our goal of announcing results from the Altastaph and NicVAX clinical trials in the second half of this year. But we’ve also made two key additions to our management team in the second quarter.

Dick Clark joined us as SVP Administration to lead our efforts to ensure that we optimize our ability to bring in the best people and to develop the strongest organization, ensuring that we maximize our strategic success. Dick has brought a wealth of human capital, strategic business development and corporate leadership expertise to Nabi and I’m pleased to have him as a member of our Executive Management team.

Also, Ian Hart joined the Company as Senior Director Vaccine Manufacturing & Facilities at our Boca Raton site. Ian comes to Nabi Biopharmaceuticals with 15 years of experience with Aventis Pasteur and he will play a vital role in successfully completing this critically important project.

I would like to conclude my remarks today by emphasizing that we achieved record progress in the second quarter and that we are well on our way to having a very successful 2004. Looking forward, the fundamental strengths of Nabi Biopharmaceuticals remain in place and we continue, on track, to execute on our strategic plans and to meet our stated milestones for 2004 and 2005.

These truly are very exciting times for all of us on the Nabi Biopharmaceuticals team. As we look forward to the rest of 2004 and to 2005, we will continue to diligently execute against the strategic plan that we have defined for our Company. We will continue to build our biopharmaceutical business to generate the cash margins we need to support our investment in developing StaphVAX.

And now, I would like to ask Mark Smith, our SVP Finance and our CFO, to highlight our financial results for the second quarter. Mark?

Thank you, Tom.

Sales in the second quarter of 2004 totaled $48m, including a record level of biopharmaceutical sales of $36m, representing and increase of 65% above the second quarter of 2003 and 7% ahead of the first quarter of 2004.

As a result of the increased higher margin biopharmaceutical sales, for the first time our overall gross margin percentage exceeded 50%, at 51% of revenue, compared to 42% in the comparable quarter of 2003. In dollar terms, we generated a gross margin of nearly $25m this quarter, an increase of over $10m from the comparable quarter in 2003.

Consistent with our operating strategy until StaphVAX is launched, we used the cash generated from increased gross margin to support research and clinical development activities. This quarter, our increased gross margin allowed for a nearly threefold increase in our investment in R&D from the prior year, to $16.9m, while still generating cash flow from operations.

On a YTD basis, record biopharmaceutical sales in the second quarter built upon our record first quarter performance. Biopharmaceutical sales for the six months of 2004 totaled $70m, a 57% increase from last year and gross margin totaled $47m, a 51% increase from the same period last year. Most importantly, within our operating strategy, after funding increased R&D spending to $28m, we generated cash flow from operations of $5.2m for the first six months of 2004.

As Thomas commented, sales of PhosLo, Nabi-HB and WinRho have contributed significantly to the growth of our biopharmaceutical revenues in the quarter. PhosLo sales were $7.8m for the quarter and we believe PhosLo sales’ strength reflects patient demand for the product, based on our review of prescription trends and product pull through at our wholesaler customers.

Nabi-HB sales were $9.9m for the second quarter, an increase compared to 2003 levels. Nabi-HB sales are closely linked to the number of Hep-B liver transplants. Our YTD sales increases for Nabi-HB are consistent with the YTD increases in Hep-B liver transplants we’ve observed from our internal tracking data of these procedures through May. As well, sales continue to benefit from increased pricing implemented this year.

WinRho sales were $17.3m. Year-over-year patient demand for WinRho has remained consistent, based on our internal tracking data. For the first six months of 2004, increased sales of WinRho wholly reflected the effect of our pricing strategy that was implemented in January 2004. On a quarterly basis, sales of WinRho for the second quarter were increased, compared to the comparable quarter of 2003 and the first quarter.

As we noted in the first quarter, we announced our price increase of WinRho pricing year-end 2003. In response, wholesaler and distributor customers increased their orders of WinRho in the fourth quarter. This had the effect of reducing first quarter sales to those customers. However, as patient demand for this product has maintained, wholesalers and distributors sought to reestablish their inventory levels in the second quarter of 2003, driving increased sales.

Sales of our other biopharmaceutical products in the second quarter were below 2003 levels. This reflected lower sales of Autoplex T and Aloprim. Our Autoplex T supply agreement ended on May 11th. Future sales of Autoplex T will be limited to products shipped to us before that date and on hand at quarter end. We are activity working with customers and treating physicians using this product, to ensure and orderly transition of patients to other treatments.

Sales of Aloprim were lower in the second quarter of 2004 compared to 2003, as the second quarter 2003 benefited from receipt of back-ordered lots that were substantially distributed in that period. Sales of antibody products decreased slightly in the second quarter of 2004, totaling $11.7m, reflecting distribution levels of non-specific plasma.

As we have described, we generated a significant increase in the gross margin this quarter, due to increased sales of higher margin biopharmaceutical products, primarily sales of PhosLo and Nabi-HB. Also, as we have previously described, when the manufacturer of Autoplex T failed to provide us contracted minimums of Autoplex T, we were reimbursed for lost margin from this shortfall in the form of a penalty.

During the second quarter, we received a penalty of $489,000 for the period through May 11th. This compares with a penalty of $1.8m in the second quarter of 2003. These penalties are included as an offset to expense within cost of sales and gross margins.

Turning to a brief review of our other operating expenses, SG&A increased to $14.5m in the quarter, primarily reflecting costs of marketing and selling PhosLo and costs related to initial commercialization activities in Europe.

R&D expense increased almost threefold from the comparable quarter to $16.9m. This increase primarily reflects the costs associated with our confirmatory Phase III trial of StaphVAX. As well as costs related to transfer of StaphVAX production process to Cambrex’s facility and the manufacture of the key components, the three StaphVAX consistency lots, in preparation for commercial scale manufacture at Cambrex, ongoing clinical work for our other development programs, and support of our currently marketed products.

Other operating expenses increased in the second quarter of 2004 to $2.3m, due primarily to the amortization expense related to the acquisition of PhosLo in August of 2003. Income tax expense for the quarter was approximately $8.6m. As part of our planned expansion into Europe, we entered into a license agreement to market StaphVAX and PhosLo in the EU, with a Nabi Biopharmaceuticals subsidiary established outside the U.S.

In recognition of the value of these license rights, we realized a gain of $55m to U.S. income tax purposes. We will utilize net operating loss carry forwards to substantially offset the cash impact of this gain in our 2004 tax return. Overall, the impact of increased non-cash expenses such as depreciation and amortization, as well as increased R&D and tax expenses, we reported a net loss of $17.6m for the second quarter or $0.30 per share.

Turning very briefly to our balance sheet. We ended the second quarter with a cash balance of $117m. We have no bank borrowings and our notes payable represent a third payment pursuant to our agreement to acquire PhosLo and will be repaid over the period ending March 1, 2007.

I would now like to review our outlook for the remainder of 2004. We now expect biopharmaceutical product sales to increase between 28% and 32% in 2004, compared to 2003. Within biopharmaceutical product sales, we’ve increased our guidance of PhosLo to be between $35m and $37m for the full year of 2004.

We are encouraged by the increases in the number of liver transplants that Hep-B observed in 2004. Based on the increase in Hep-B liver transplant activity, we maintain a full year guidance, updated in June, of an 8% to 10% increase in sales of Nabi-HB for the year, based on consistent patient-use trends, the benefit of a price increase, and our new pricing strategy implemented this year.

We continue to expect full year sales of WinRoh SDF to increase in 2004 from 2003 levels, although at a significantly lower rate than in 2003. This guidance is unchanged from our prior guidance, notwithstanding the notification we have received from Cangene. We are committed to working with Cangene to ensure supply of this product to patients through the end of our distribution agreement term in March of 2005.

Total antibody sales guidance is unchanged at approximately 20% lower than 2003 levels, due to the completion of a zero-margin supply agreement in April 2003. Our sales of non-specific antibodies in 2004 are supported by a long-term contract with a major customer that provides for the purchase of substantially all of our non-specific source plasma production.

Overall gross margin is expected to increase approximately 20% 24% from 2003 levels, due to the positive impact of increases sales of higher margin biopharmaceuticals, particularly higher sales of PhosLo. Also, with the acquisition of Aloprim completed, we will benefit from a lower royalty rate on this product through the balance of 2004 and beyond.

Based on our current planned utilization of the plant, including the activities related to establishing vaccine manufacturing within the Boca Raton manufacturing plant in the second half of the year, we now expect excess manufacturing capacity will total approximately $7m in 2004.

R&D costs are now expected to almost double from 2004 levels of $29m, as we continue our Phase III clinical trial of StaphVAX throughout 2004 and complete the transfer of StaphVAX manufacturing process to Cambrex. In addition, this expense covers costs of the immunogenicity trials of StaphVAX in the U.S., initiation of the PRECISE study of PhosLo, conduct of the Altastaph neonate and Altastaph adult trials, work on the NicVAX trial in the U.S. and activities related to filing for registration of StaphVAX, PhosLo and Nabi-HB in Europe.

Our guidance for SG&A expense is also unchanged. The commercial opportunity in Europe for StaphVAX and our currently marketed products PhosLo and Nabi-HB is expected to incur pre-launch costs of approximately $9m in 2004. To undertake the initial activities to obtain reimbursement and perform pharmacoeconomic studies, as well as educate key opinion leaders within European markets of the benefits from our product.

SG&A to U.S. operations is expected to remain consistent with 2003 level, based on the impact of marketing PhosLo for a full year, offset by the impact on the 2003 results for the retirement charge for our former CEO.

Due to the restructuring of the license rights of StaphVAX and PhosLo in the EU, resulting in a U.S. taxable gain, we anticipate tax expense for the full year to be approximately $15m to $17m. As a reminder, deferred tax assets to net operating loss carry-forwards will limit the cash outlay for this expense.

As a result of incremental R&D activities and initial commercialization activities in Europe, including income tax expense, we expect to generate a loss in 2004. After the impact of amortization of the PhosLo intangible assets and depreciation, we continue to expect to generate positive cash flow from operations.

On the capital investment front, we continue to expect capital expenditures for fixed assets and our manufacturing right at Cambrex to total $28m to $29m in 2004, including approximately $18m to $20m for our vaccine manufacturing facility.

Now, let me turn the call back to Tom McClain.

Mark, thank you very much.

What we’d like to do is now open the lines for questions and joining Mark and me are both Henrik Rasmussen, our SVP of Clinical, Regulatory, and Medical Affairs and Raafat Fahim, our SVP for Technical and Production Operations.

Operator, would you open up the lines for us, please?

Thank you. (Caller Instructions.) We’ll pause for just a moment to compile the Q&A roster. Your first question is from the line of Tom Shrader with Harris Nesbitt.

Hello Tom.

Hi, good afternoon. I guess this strikes me as bizarre. What’s the chance or what’s your sense -- I mean, Cangene obviously has a Hep-B immune globulin at the FDA. Given the hoops that the FDA has made you jump through in terms of data, do they have the same kind of data? Could they be planning to compete?

I can’t comment on what data they may have. We feel that in the liver transplant indication that we are in a unique position, because of the studies that we have done with Nabi-HB and the history that we have with the product, that we stand in a unique position to be able to pull the data together. But it would be impossible for me to comment beyond that as to what data Cangene may or may not have for Hep-B immune globulin in liver transplant patients.

Along the same lines, can you just educate me? What are the major products that they could be looking for synergy with, I mean, other than WinRho and Hep-B?

As I understand it, Tom, and certainly they need to answer questions about direction. But when they were looking at WinRho and the ideal partner for WinRho they wanted a company that they believed was more fully committed to plasma-based therapeutic products. And that with our pipeline and our expanding commercial activities, that we seemed to be diversifying our focus in a way that they felt we did not have that kind of alignment going forward. And I believe that, for them, strategically, it’s important to partner with that kind of a company and it’s difficult for me to comment beyond that.

Okay. All right. Thanks. I’ll jump back in line.

Okay.

Your next question is from Martin Auster with Wachovia Securities.

Hello Martin.

Hey, gentlemen, how are you?

All right. How are you?

I have a quick question about some of the economics on WinRho. As we look going forward, is there any sort of a selling expense that you can kind of take out of the model going forward or is WinRho pretty much fully dropped down to the bottom line?

The only things that we’ve discussed with Cangene is over the next nine months or so, as we face investments, be they continuing education programs, medical meetings that would be designed more for a long-term versus a near term benefit in patient demand, those are programs that we will discuss with Cangene.

And if they elect that we should go forward with those programs, then we would expect Cangene to fund those initiatives. But if they would elect that those are not important, those would be initiatives that we would not go forward with.

Okay, but on the long-term basis, off kind of the current SG&A run, is there any sort of expenses you can kind of pull out of that as we going forward? Or is it pretty much better to think of WinRho that just pretty much -- you know there’s a profit split that permits dropping down to the operating line?

No. Clearly WinRho requires significant promotional support each year and coming back to some of the things that I talked about, which are continuing education programs, marketing materials, clinical studies, medical meetings, conferences, so, it is a product that requires promotional support. So it isn’t just a fall through to the margin line. I’m sorry I didn’t understand your question.

Well, that helped and then to Tom, so some of those incremental, that incremental effort and the asset allocation you’re making toward to sell WinRho, that’ll just get reallocated probably to PhosLo and then ultimately to StaphVAX? Or -- I’m just trying to get a sense of whether or not there are some expense reductions that could take place.

Those savings would not be replaced with PhosLo funding. We have PhosLo funding in our numbers already. But what it would do is contribute operating cash flow for investment in the clinical programs.

Okay. I’ll hop back in queue. Thank you.

Okay. You’re welcome, Mark.

Your next question is from Jim Birchenough with Lehman Brothers.

Hi Jim.

Hi Tom, a couple of quick questions just following up on Martin’s question. Can you tell us what percent of SG&A and R&D is attributable to WinRho?

We’ve not really commented on that in the past.

Well, I mean, not in breaking it out like that. It’s clearly not a heavy user of our R&D activities, because it’s a product that we license from Cangene and we support through our Medical Affairs group and diligence activities in that regard. But that’s not a significant investment, but we really have not broken it out within the SG&A category.

Jim --

Is it roughly proportional to sales? Is that a good way to look at it?

Jim, maybe this could be helpful to you and to Martin. When we talk about sales call allocation, currently, within the sales force, WinRho is getting between 40% and 45% of our sales call emphasis, currently and there are two things that we intend to do. The costs that are directly linked to WinRho for advertising, promotion and support, those are costs that would go away when the WinRho product goes away.

As we transition towards March, what we’re going to do is turn that sales force emphasis towards PhosLo. And we’re going to closely watch the impact that that has on unit sales of PhosLo and make a determination as to whether that is a successful strategy and that it will cover the cost of that sales effort. Or, if we need to, make further adjustments in expense, because we can’t generate the incremental benefit from PhosLo sales. Does that help?

It does and I guess the big question - then I’ll jump back in the queue - is when you look at the net effects of losing WinRho sales and consequently royalties payable and then the effect on SG&A and the trends you’ve seen in Nabi-HB and PhosLo. Are you confident that you can maintain positive cash flow from operations in ’05?

What we believe is that, with the strength and the growth, that we would expect to achieve in Nabi-HB and PhosLo, with some of the expense steps that we will take. That the operating cash flow from those product sales will support what we need to do with StaphVAX and what we need to do to support PhosLo.

What I indicated in my remarks would be we would need to make a decision with regard to Altastaph clinical trials, which would be incremental trials, rather we would invest cash to support that effort.

Okay, great. Thanks for taking my questions.

You’re welcome.

Your next question comes from Jason Aria [ph] with [Gillard] [ph] Equities.

Hello Jason.

Hey guys, Tom, a couple of questions regarding WinRho. Where was this in sales? Where was this positioned in your salesperson’s bag? I know you talked about percentage of the call, but was this third out of the bag, second out of the bag, first out of the bag?

Well, yeah. With hematologist/oncologists, by and large, when we made the call to that doctor’s office it was first out of the bag. And the actual hematology/oncology promotional support for Aloprim is much more focused than that for WinRho, i.e., it’s a smaller number of centers in which Aloprim is the primary call. So that’s why WinRho, by and large, would have been the primary call in hematology.

Because obviously you’re using the same sales force that you’re using for PhosLo and Nabi-HB?

Clearly so.

Okay. So I assume what you’re saying, then, is for the most part, concerning what you just said about Aloprim, that those calls will not have to be made anymore.

Right and what we’re going to try to do, what we want to evaluate is if that call attention is now turned towards PhosLo and to Nabi-HB. What can that do to the prescription trends and patients in the end for those products --

That’s where I’m going with it.

-- and can that greater attention drive margin return that justifies maintaining that level of sales support as we go forward.

Right. So really, what all of this discussion is about is really a $25m product. At least in terms of Nabi gets splitting it, $25m in revenues, really the absence of it, maybe for two quarters of ’05, since hopefully you’ll start selling StaphVAX maybe as early as late ’05 at least in Europe. Is that fair?

Right. Yeah. There are a couple of factors that we want to make sure everybody keeps in mind and you hit one. Which is, because of the profit sharing relationship with Cangene, we have to sell $2.00 of WinRho to get the same margin that we enjoy by selling $1.00 of PhosLo or $1.00 of Nabi-HB or $1.00 of Aloprim, which is very clear.

The second is when you look at 2005, which obviously is the last big year of investment in StaphVAX before we hope to be able to commercialize the product, the WinRho agreement will extend through the end of the first quarter. And the clinical study of StaphVAX will be completed by the end of the third quarter so that there would be a significant decrease in our clinical trial costs after that study is completed. So, we just wanted to make sure that, as people focused on WinRho, that they focused on those factors as well.

And I guess maybe my last question, perhaps for Mark, is when you take WinRho out in Q2 of ’05, what will that do to biopharma gross margins?

Actually the gross margin percentage would increase, because each of the products - PhosLo and Nabi-HB and WinRho - are higher.

No, just PhosLo and Nabi-HB and Aloprim.

Aloprim, excuse me -- a higher gross margin product than is WinRho.

Right.

And as Tom indicated, we’ll certainly be working toward growth in those products that we believe will seek to offset that dollar gross margin change that WinRho contributes today.

Can you give us what you would project, Mark, for gross margin less WinRho, a biopharma gross margin for the Company?

We haven’t commented on ’05. In ’04 we’ve commented only that gross margins are increasing for the full year and to the point -- I’m sort of trying to lead you to the math, help the math a little bit. We’ve commented that we share profits on WinRho equally, after accounting for COG and selling expense with Cangene.

Okay and I guess maybe back to you, Tom, I guess my last question. You talked about increasing the sales force, obviously, especially here to get ready for a StaphVAX launch. But might this mitigate the need for a certain amount of sales force expansion, since their time won’t be used making the WinRho calls as you discussed earlier?

Clearly that would be the case. That we won’t have the emphasis with these reps on WinRho and obviously with an early focus of StaphVAX on the nephrologists, that there will be more of their time deployed to that key early prescriber for StaphVAX.

Well that’s what I’m trying to get at. Will that save on costs? In other words, will you have to actually hire fewer reps than you had previously projected?

Yeah. With everything we know today, we definitely would be in a position of hiring fewer reps when StaphVAX launches.

Thank you.

You’re would. Thank you.

Your next question comes from Aaron Reames with Stanford Financial Group.

Hello and thank you for taking my call.

Sure.

Some of my questions have already been answered, but maybe I can phrase a few items in a different way. So, as you focus the sales force towards PhosLo and Nabi-HB after WinRho is dropped off, would it make sense to just go ahead and keep those sales reps in place because of the relationships that they’ve currently built? And would that allow them a better carry-through for the marketing of StaphVAX later on?

Well, yeah, what we’ve found in the time that we’ve had PhosLo, Aaron s that PhosLo is a highly promotion-sensitive product.

Yes.

So our efforts thus far have been to continually evaluate increasing our sales force size to support PhosLo, because, as we’ve found, as we’ve added resources, we’ve enjoyed a higher return on those resources.

So our X and Y, then that’s the reason why we said that with the WinRho sales force we would initially plan on redeploying that time primary towards PhosLo. But also, towards Nabi-HB and we believe that we’ll see a benefit from that.

We also have, though, a responsibility to investors that if we don’t see that return that’s a cost that we would need to look at very hard, if that’s not bringing the return. But, at this point, our expectation would be that our sales force has already been very effective in the return and that it will have a positive impact on PhosLo revenues.

Okay and then my last question. On a percentage basis, I was wondering if you could give us a range of the cash flow that’s attributable to WinRho? Maybe something that’s a little bit more broad, just for kind of modeling purposes and things of that sort?

Aaron, the best thing that we can do - and you may not find this satisfying at all - but WinRho, we’ve said, is a product that earns typical pharmaceutical kinds of margins and it would have typical promotional support for WinRho. And after you get to those two numbers, you take the profit and Nabi’s benefit from that is half of the number.

Okay.

Okay? I can’t think of anything else in the public record that would give me the ability to give you a better answer than that.

Okay. Thank you.

Okay.

Your next question is from Jim Birchenough with Lehman Brothers.

Hey Jim.

Hi guys, just to focus on the pipeline a bit, could you just give us some more specific timelines on when we should expect data for Altastaph, NicVAX and the immunogenicity studies for StaphVAX?

We would expect to have announced the Altastaph and the NicVAX results in the second half of the year. And we also believe that we will have results from the first immunogenicity studies before or after the end of the year but very close to the end of the year.

And just on Altastaph specifically, could you just remind us of the design of the neonatal trial, what the endpoint is you’re looking at and I guess I’ll try again to see if I can get more specifics on whether we should expect that third or fourth quarter.

What I tactically forget, when you asked that question, is that Henrik is here and he can answer those questions and I can get out of the hot seat. Henrik, do you want to address that?

I would be delighted.

Thank you.

Basically the Altastaph neonate trial is a dotted line, placebo-controlled, randomized study in low birth weight babies with birth weights between 500gm and 1500gm. And we are basically looking at the incidence of Staph aureus infections and bacteremia in these patients for the initial 42 days, after entry into the studies. So that is the primary endpoint. We always are monitoring other infections, as well as obviously looking at the side effects profile, as well as the antibody titer levels we are getting.

And what reductions in staph bacteremia infection are you looking to show and again, should we expect that data in the third or fourth quarter?

Right. You will certainly -- well, what Tom has said is that we will get the data in the second half. So I think it’s going to be somewhere between the third and the fourth -- just around the third and the fourth quarter.

In terms of the reduction, it’s very difficult to assess. We will anticipate, obviously, recognizing that Altastaph is effective against Type 5 and Type 8 infection and recognizing that distribution in the neonate population is very similar to the one in the adult population, we would anticipate that we would see a reduction of 60-70-80%.

But it’s only then guesswork and that is based on what we saw in our first Phase III study with StaphVAX. The other comment I can make is that Inhibitase found a reduction of approximately, I think, around 60% in their neonate studies, so we would be looking at reductions at around that level.

Great, well, thanks for taking the question.

All set, Jim?

Yes.

All right. Thanks.

The next question is from Russ Gilbertson with Roth Capital Partners.

Hello Russ.

Hi Tom. I have a question for you getting back to the previous line of questioning. Would you consider using some of your cash to end license another proved product that would be accretive and then give your sales force some more work to do?

Well that was embedded in one of the phrases that I used where we had the cash, which we felt we would also look at investing in other near-term opportunities to generate incremental cash flow from operations.

Certainly, if we were able to acquire a product that is in an area that would be strategically aligned with StaphVAX or with Altastaph, we would have a strong interest in expanding our presence. And certainly, based on the success that we have with PhosLo, we’ve continued to monitor opportunities, though there isn’t anything that I would comment on as being a realistic opportunity as of this moment.

So nothing in the near term, but something you’ll explore.

That we’ll continue to explore, absolutely.

Okay. Thank you.

You’re welcome.

Your next question is from Dallas Webb with Stanford Financial.

Hey guys, how are you doing?

Good, Dallas, how are you?

Oh, not bad. Just briefly touching on the WinRho subject again, what does this do for your outlook on profitability?

Our outlook on profitability remains the same and that’s that, with the launch of StaphVAX and the margins that we will earn on that product, that that will be the key driver of returning us to profitability and the WinRho announcement does not have any effect on that.

Okay, so is profitability expected in the 2006 time frame then?

Well, it’s difficult for us to project on when the European approval will take place and when the reimbursement will be secured in the individual markets. But when our sales force is able to be up and running in the markets in Europe we would expect to have a pretty rapid uptake in utilization of StaphVAX.

Okay and then kind of moving to some of the things that may offset the loss of the winter revenues.

Uh-huh?

The increase in Nabi-HB sales that you’re expecting, you mentioned a favorable transplant reimbursement strategy that may go into effect. Could you just briefly elaborate on that?

We continue to monitor areas where, at a state level under the Medicare reimbursement, that new reimbursement paradigms are established and there are some trends that we have gotten indications of in the Midwest that we think may actually expand the eligible patient population. And when we begin to see that in a more solid way, that’s something that we’ll be very happy to comment on.

Okay and as far as in the EU, are you seeing any off-label use of Nabi-HB over there yet?

No. We’re not. It’s not licensed. The only way the product could be available in Europe is through an agreement that we signed a couple of years ago, when it’s reflected on a specific name basis, that U.S. licensed product could be made available to patients in Europe. But that’s been very limited, to this point.

Okay and two more just real quick questions. As far as price increases for PhosLo, we saw one in January. Are we expecting any more price increases this year?

We have a policy of not commenting on price increase expectations and I think you can certainly imagine, with the important customers that we deal with, that that’s a good policy to have.

Okay. What was the price increase in January?

It was 13% for PhosLo.

Okay and then the final question. As far as the immunogenicity study for StaphVAX, you mentioned cardiovascular and orthopedic surgery patients. Is this trial enrolling both of those patients or just one type of patient? How is that working?

It’s just one, but I’ll let Henrik comment on that.

Okay.

The one we announced we started in the United States last month is focused on patients undergoing cardiothoracic surgery.

Okay and then --

[Crosstalk]

We [inaudible] started [inaudible] treating certain type of patients, as Tom indicated, later this year.

Okay. Okay, thank you very much.

You’re welcome and just, Dallas, the follow-up to that as well is that the pharmacoeconomic studies that will be forthcoming from Duke University in the second half of the year will also be focused on the cardiac surgery and orthopedic surgery patients. So there’s a lot of synergy between the clinical data that we’ll be generating and the new economic data that begins to address the cost and seriousness of infections in the broader at-risk patient groups.

Okay. Thank you.

Uh-huh.

Your next question comes from Tom Shrader with Harris Nesbitt.

Hi.

Hi Tom.

If I can get back to the Nabi-HB, I just want to -- did you say transplants are up 10% to 20%?

Uh-huh.

You took the price increase, but you expect sales this year to be up 8% to 10%?

Because the sales of Nabi-HB, they build, because it’s not just the sale at the time of transplant, but it’s the revenues that you realize on a maintenance basis. So, when --

So you don’t get a full year. I got you.

Right. So you start to see the bump up in revenues, but in fact that curve kind of builds over time because, on the maintenance basis, you have almost an annuity sales as more and more patients are on Nabi-HB. It’s the new transplant patients, but plus the patients who were transplanted last month on maintenance and two months before that.

Right.

So that’s how those sales build and that’s why there would be a lag between our reported revenue increase and the immediate increase in transplants.

In terms of the accepted Nabi-HB application, the MAA acceptance, I’m sorry --

Right.

What’s the sense about needing the same 24-month data there? Have those discussions been had? I mean, you’ve applied for European approval without data that you know the FDA wants. Can you walk us through what you’re thinking?

Henrik?

Yes. Obviously we met with the German regulators before we decided to submit the MAA, Tom, and we took them through the data we have and we basically got this feedback. They appeared to be adequate and that obviously was without the additional data required by the FDA.

There are two big differences, I think, between the European submission and the U.S. submission I want to emphasize. One is that they already have immune globulins on the market in Europe for the liver transplant indication. That is not the case in the United States, so obviously they have already accepted that these types of agents are effective for the prevention of Hep-B towards liver transplant.

Secondly, the recommended dose we are putting forward to the German authorities is virtually identical to the recommendations, which were issued by the CPMP sometime last year. So there are very good indications, I believe, that we won’t require the same amount of long-term data as what the FDA has requested.

I think it’s also important to emphasize that the only reason we believe the FDA, late in the day, have requested these long-term data is due to the Blood Advisory Committee meeting, which were held back in March and they recommended these longer-term follow-ups. So we don’t think we’ll have the same problem in Europe.

If we do, though, we are in the process of gathering those data to comply with the FDA’s request and if the Europeans are coming back asking for those data, we should be able to supply them. But we don’t think it will be needed.

And there are no orphan drug issues in Europe?

No. No there were not.

Okay.

From a commercial standpoint, the excitement about Nabi’s product, because it is specifically formulated for IV use, is that it would have unique advantages and that’s why the interest in Europe for Nabi-HB being licensed for liver transplants.

Is the price point about the same in Europe?

I don’t think we’ve yet commented on pricing in Europe.

I don’t mean yours. I mean the existing.

It’s variable by market. So what we will do, obviously, with Nabi-HB, is look to position it in the markets where we have the greatest economic return first.

Okay.

So that and you don’t -- you negotiate reimbursement on a country-by-country basis, so as we expand beyond Germany we will use that selectivity in determining where we will distribute.

Okay. Thanks.

Your next question comes from Kevin Sageeter [ph] with Natexis Bleichroeder.

Hey Kevin.

One quick question. Forgive me if you went over this. I had to jump off the call for a moment, but I believe you said you were either going to go with the contract sales or an acquisition approach to building the marketing infrastructure in the EU. I was hoping you could walk me through a little bit more detail why it looks like you’ve taken the option off the table of building your own sales force. And could give us either a timetable or your thoughts on when we might get a little bit more detail on that.

Sure. Clearly, when a company begins to develop operations in Europe and it builds its own employee presence without having an established record of sales, under the employment laws in Europe you take on a good deal of risk, a good deal of exposure. And so, what we believed was a rent strategy, which would be, could be of a very short term or could provide the opportunity for Nabi, in fact, to buy those resources after StaphVAX is launched was a good way for our investors to kind of put that risk on another party.

The other thing that our market models for Europe clearly demonstrate is that, with StaphVAX, there is a huge sales force requirement for the initial launch, but when you get into a steadier state with the product, that promotional effort is greatly reduced. So, complimenting what we would want to do with a contract sales force, means that we could have the total breadth of sales force available to us in the critical launch period, but then be able to reduce that sales force when we get to the steadier state scenario.

And when do you expect to be able to give us a little bit more detail on who you’re going to go with there and frankly, what the kind of allocations, perhaps in 2005, at your end are going to be on a startup cost basis?

Well, what we’re doing right now is in the evaluation of both acquisition opportunities and the contract sales force opportunities, trying to model for the best economics and the best outcome. If it’s full contract sales strategy, that would be something that I think we would be very explicit about by the middle of next year because those agreements would start to fall into place.

Okay. Thanks a lot.

Okay.

Your next question comes from Matt Duffy with Black Diamond Research.

Hi Matt.

Good afternoon, fellows. Thanks for taking my call.

Absolutely!

Let’s talk about looking a little bit at some of your repositioning of your representatives and details post WinRho.

Yes?

Are there dialysis centers and nephrologists active in dialysis that you are not calling on now or if you were switching people over, are you going to be able to increase -- reach your frequency, I guess is my basic question.

Yeah. It would be more of -- well obviously there are a lot of nephrologists and dialysis centers around the United States. And what we have done, because now we’re at the point where we have almost a full year of data, we’ve been able to segment those physicians into A, B, and C prescribers. And our call focus, today, is primarily on the A physician who drive the most significant piece of the phosphate binder market.

The WinRho opportunity would allow us to increase the frequency of reach to more of the B physicians and perhaps to call on the C physicians, where by and large we would be relying on mailed materials, at this point in time. The other distinguishing factor of our promotion of PhosLo versus the way other products are promoted in the nephrology area is the time and the effort that we spend with physicians. And certainly with more resources we would be able to make sure that we’re spending all the time that we need to in their offices. Today that’s averaging about 15 minutes.

One other thing, though, to keep in mind is what we also described and that’s the clinical studies that we expect to initiate in the pre-dialysis patient population. And if we are successful in that indication, then that would open up not only new opportunities with nephrologists who treat some of those patients, but a need to reach out to other physicians who may be caring for those patients before they go on to dialysis.

Great. Also, you had sounded like you’re doing a fair amount of market research. I wonder if you’re getting any sense, at this point, of what kind of traction the CARE data is getting out in the marketplace?

Our indication is that it’s getting excellent traction out in the marketplace. The attributes that we continue to describe, the fact that it’s the only placebo controlled, double-blinded, head to head comparison of PhosLo and Renagel, we believe physicians are paying serious attention to the results of that study.

Have you seen that translate into just higher doses of PhosLo, as most patients seem to be getting at least some PhosLo? Or how is that translating, in terms of actual product usage?

Well we certainly are seeing gains in the utilization of PhosLo. I think, when you reach out to physicians to understand what’s driving that, our message has been twofold. First, that with the K/DOQI Guidelines that PhosLo should be the treatment of choice versus Tums or calcium carbonate products and we believe that that part of the message is being effective.

Also, with regard to treating patients that, because of PhosLo’s demonstrated efficacy and safety and because of the significant cost benefits, what we’re trying to do is reposition PhosLo to always be considered as the first line therapy for the treatment of hyperphosphatemia. And we certainly have a long way that we can go to try to build on that position, but that’s what our key drive is and our messaging with the physicians.

Okay. Thanks.

You’re welcome.

At this time, there are no further questions. Are there any further remarks?

No. I would just like to thank everyone. 23