Vaxart Inc (VXRT) 2004 Q4 法說會逐字稿

Good afternoon. My name is Rebecca, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Nabi Biopharmaceuticals' fourth-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, February 15, 2005. Thank you.

I would now like to introduce Mr. Mark Soufleris, Vice President of Investor and Public Relations. Mr. Soufleris, you may begin your conference.

Thank you. Good afternoon, and welcome to the Nabi Biopharmaceuticals' conference call and webcast to review our 2004 operational and financial results and our key goals and expectations for 2005. 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 European Union may not be successful; the possibility that we may not realize the full value of our acquisition of PhosLo; the Company's ability to raise additional capital on acceptable terms; 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 hepatitis B 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 United States 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, February 15, 2005. Any redistribution, retransmission or rebroadcast of this call or the webcast in any form without the expressed written consent of Nabi Biopharmaceuticals is prohibited. A telephone replay of today's conference call will be available through 5 PM Eastern Time through February 22, 2005. Information about how to access the telephone replay is available on our recently enhanced and redesigned 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' website, www.Nabi.com, through 5 PM Eastern Time on February 22, 2005.

I will now turn the conference call over to Thomas H. McLain, Chairman, Chief Executive Officer and President of Nabi Biopharmaceuticals.

Mark, thank you. Good afternoon and thank you for joining this conference call. I would like to begin my remarks today by acknowledging the employees of Nabi Biopharmaceuticals. Their efforts, their commitment to doing things the right way and their dedication at accomplishing what was required to meet and exceed expectations, made 2004 a record-setting year for our Company. 2004 was truly a transformational year for us as well, as clearly evidenced by the significant progress made across all areas of our business.

In reviewing our 2004 performance, the results are clear. We have continued to successfully execute our strategic plan. And our operating model of using the cash flow from our biopharmaceutical business to invest in developing our R&D pipeline continued to prove successful. We have great momentum moving into 2005, and we look forward to building global market opportunities in our chosen areas of business focus. Those areas include grand positive bacterial infections, kidney disease, hepatitis, and opportunistically nicotine addiction.

Last quarter, I highlighted performance measures that illustrated the dramatic financial transformation that we achieved in just 4 years. Today, I would like to focus on the unprecedented level of accomplishment we achieved in 2004. It is a level that would have been inconceivable just 2 or 3 years ago. I think we'll all agree that this level of performance is extraordinary in a company the size of Nabi Biopharmaceuticals. By highlighting only the major achievements of 2004, I am confident I can illustrate these points.

We completed our first European license application. Actually, we completed three product filings in Europe, culminating with the StaphVAX MAA filed 24 months ahead of our original plan. We initiated and we completed enrollment in a 3,600 patient efficacy study in less than 10 months, an impressive achievement in comparison to any sized company. We successfully transferred the manufacturing process for StaphVAX to a new contract manufacturing partner. And we completed a production of three consistency lots of vaccines all within 10 months. As we know from recent media coverage on vaccines shortages, biopharmaceutical manufacturing is much more complex than producing capsules and pills. This achievement demonstrates the strong competency and the capability of the process development and manufacturing teams at Nabi.

We constructed a state-of-the-art vaccine manufacturing facility here in Florida in 6 months. That was achieved despite the delays caused by shutdowns for two hurricanes, which hit this area of the state. And we dramatically accelerated the development of our next generation grand positive vaccine so that the Staph epidermidis and Staph aureus type 3 through 6 vaccines can enter clinical studies in 2005. We completed Phase I/II and Phase II clinical studies of Altastaph and NicVAX that indicate clear directions for efficacy studies targeted with funding for 2005.

We also defined the need for an expanded next generation Altastaph product to prevent infections in neonates. They key infection driver in this population is Staph epidermidis, and we expect to build that into the product this year. And to protect the value of these important new product efforts, we also successfully built additional patent positions around our technologies.

Now, from an operations side, we reversed a declining market share for PhosLo. And that achievement needs some context. This is our first real competitive experience. And this is in a market that has been redefined by a tough competitor. Genzyme continues to primarily invest in sales and marketing support, while we are also directing a significant investment in clinical and reimbursement studies. To reverse the trend says something good about our sales capabilities. But taking the lead in new prescriptions, growing total prescriptions by 8 percent, and growing equivalent bottle sales by 10 percent over comparable 2003 levels evidences our success to date. We will work to build our market share position from here in 2005.

Overall, we grew total biopharmaceutical sales by 21 percent and overall gross margin to a record 48 percent of sales. We doubled our investment in research and clinical programs, while still generating positive cash flow from operations. And we ended the year with $103 million in cash, despite investing over $25 million in capital and vaccine manufacturing assets.

To conclude this review of 2004 -- as a Company, we set realistically aggressive goals. While we should never expect to hit all of them, a review of our 2004 accomplishments demonstrates that we focused on clear priorities -- drivers of long-term value. As a result, we made great progress toward our goal of transforming Nabi into a fully integrated biopharmaceutical company.

Any discussion of significant development since our conference call last October has to focus on the successful completion of our key objective for the year -- the filing of our marketing authorization application for StaphVAX in Europe in December. We were pleased to be able to report in January that this filing has been accepted for review by the European regulatory agency, EMEA. We are now on EMEA's timeline for questions and inspections in 2005, all directed toward an initial approval for the use of StaphVAX to prevent Staph aureus infections in patients with end-stage renal disease on hemodialysis.

Another significant fourth-quarter accomplishment was the very exciting results from our U.S. Phase I/II clinical trial, using Altastaph for the treatment of hospitalized adult patients with persistent Staph aureus bloodstream infections. The results of this study indicated that the antibodies in Altastaph could work effectively with antibiotic therapy to resolve these infections. Patients treated with Altastaph in combination with antibiotics showed a 5-day reduction in the median length of hospital stay versus patients who received antibiotics and placebo. In its further context, the way Altastaph clears Staph bacteria using the immune system is the same as StaphVAX. So, these results provide additional evidence that the antibodies created by StaphVAX could work in patient populations beyond ESRD. These results also suggest that Altastaph could represent a significant new approach for treating life-threatening Staph aureus infections and counter a devastating trend in outcomes caused by increasing antibiotic resistance.

In terms of patients, in the U.S. alone, nearly 2,000 patients will be hospitalized this year with persistent Staph aureus infections. Reducing hospital stay by 5 days would produce a significant benefit in terms of patient well-being and cost. In addition, because the same patients are at a significant risk for reinfection post-hospital discharge, that was approximately 30 percent in a 2003 clinical study by Brigham and Women's Hospital, this is an ideal population to be dosed with StaphVAX upon discharge. We will consider an extension in next clinical trial, treating these patients with Altastaph and then dosing them with StaphVAX at discharge for long-term protection.

A third significant fourth-quarter event was the filing for approval for PhosLo in Europe. This filing represented a significant milestone toward our goal to establish and begin building on nephrology presence in Europe in advance of the approval of StaphVAX. Marketing PhosLo will be an important part of the foundation for defining our Company and our commercial presence in Europe. By building our reputation and relationship with nephrologists based on PhosLo, a product with efficacy advantages demonstrated in well-designed clinical studies and an overall treatment approach that delivers compelling cost of care advantages, we will set the stage for a successful StaphVAX launch in Europe.

Today, I would also like to review our key 2000 objectives aligned with executing our business strategy. Our focus is always on clear priorities, doing the right things to build value for our investors both now and for the long-term. Our focus for 2005 is in three major areas. First, advance StaphVAX toward commercialization. Second, advance our next generation products -- Altastaph, NicVAX, and the grand positive vaccines. And third, generate cash flow from operations.

First for StaphVAX -- in 2005, we planned to progress toward licensor and commercialization in Europe. We will respond to EMEA request for information to support approval for the MAA, build our European team, complete economic and reimbursement studies in each major market, and conclude important pre-marketing and key opinion leader activities to build awareness of -- the medical challenge, the strong alignment between StaphVAX and the healthcare agenda in major European markets, and the demonstrated win-win of medical and economic benefits from our paradigm-changing approach.

Also for StaphVAX, we plan to file our U.S. BLA in 2005. We will complete our StaphVAX Phase III trial. We expect to report on these results at a conference or an investor meeting in late Q3 or Q4 -- complete the immunogenicity studies in cardiovascular and orthopedic surgery patients. Results should be available by the end of the third quarter -- complete bridging and consistency lot clinical trials. Again, results should be available by the end of the third quarter -- complete infection rate and pharma-economic studies in other at-risk patient groups, complete manufacturing of three consistency lots in our new Florida vaccine manufacturing facility. And we will work against a very aggressive goal -- to have clinical data from vaccine manufactured in Boca by the end of the year.

Second, to advance our next-generation products, we will define the next Altastaph trial design with regulatory authorities in the U.S. and Europe for treating patients with persistent Staph aureus infections. With funding, we would plan to initiate that trial in the second half of 2005 -- obtain external funding to complete the NicVAX's Phase II dose optimization study and initiate a pivotal NicVAX study on smoking cessation. Results from the immunogenicity trial could be available in time to allow the plan Phase III study to begin before year-end.

We will advance our next-generation vaccines for Staph aureus Type 336 and Staph epidermidis into Phase I clinical trials in the first half of this year. And we will build a development plan for Civacir with U.S. and European regulators.

And finally, to advance our commercialization model to generate cash flow from operations, we will reallocate our sales force to almost double our sales calls on PhosLo after the first quarter, convert PhosLo tablet demand to gel caps, complete PhosLo marketing realignment and prepare for the adoption of Medicare Part D in 2006, continue to advance the PhosLo clinical program with the CARE II study of valuating PhosLo plus Lipitor versus Renagel plus Lipitor. Preliminary results will be available this year. Arterial calcification results will be available in 2006.

We also plan to conduct a study with PhosLo in chronic kidney-diseased patients with the goal of expanding the labeling for PhosLo to the significant and growing CKD (ph) patient population in the U.S. and Europe -- prepare for launching Nabi-HB intravenous when the BLA is approved. And we'll also prepare for European approvals for both PhosLo and Nabi-HB. Those opportunities will be important in helping us to build our European commercial presence.

Also to help us further build our commercial presence, I would like to highlight the addition of two important new members to the Nabi Biopharmaceuticals' management team. Le Roux Jooste recently joined us as Senior Vice President, Global Sales and Marketing. Le Roux will be responsible for defining the marketing strategy for PhosLo and StaphVAX and building the Company's commercial presence in Europe. He has extensive global management experience, having launched several market-leading brands including Prozac and Enbrel. He is a strong addition to our senior leadership team.

Also joining the Company during the fourth quarter was Dr. Joy Barton, as Vice President, Business Development. Dr. Barton will focus on three strategic areas -- products, technologies and alliances. Joy has extensive global business development experience and is also a great addition to our leadership team.

To conclude, we are very excited about the significant achievements that we have made with the Company in 2004 -- achievements that have helped transform and redefine Nabi Biopharmaceuticals as a Company. But nothing worthwhile comes without challenges. In setting our business plans, we anticipate changes and we pre-define alternatives. We believe that despite the expiration of the WinRho license agreement, we will advance the important 2005 actions to support the launch and commercialization of StaphVAX. We are excited about the challenging goals that are in front of us this year. And I can assure you that the entire Nabi Biopharmaceuticals team is dedicated and committed to successfully executing against these milestones and to ensuring that we continue to build value for our shareholders in 2005 and beyond.

Now, I'd like to ask Mark Smith, our Senior Vice President of Finance and CFO, to highlight our financial results for the year. Mark?

Thank you, Tom. Our total sales for 2004 were $179.8 million compared to sales of 176.6 million for 2003. Biopharmaceutical sales for 2004 were a direct level of $131.8 million compared to $109.5 million for 2003, an increase of over 20 percent. These biopharmaceutical sales for 2004 benefited from full-year sales of PhosLo, which drove gross margin for 2004 to $85.5 million or a record level of 48 percent of sales, compared to $76.8 million or 44 percent of sales for 2003.

Looking first at key product sales results -- for the full year 2004 sales of PhosLo were $37.6 million, exceeding our stated expectations. Sales of PhosLo totaled $9.3 million in the fourth quarter compared to $7.8 million in the fourth quarter of 2003. Patient demand for PhosLo has increased by approximately 7 percent for the full-year 2004 compared to 2003, as reported by prescription tracking data. In addition, PhosLo sales have benefited from price increases announced in each of January and September of 2004.

In planning for 2005, we made a strategic decision to convert from PhosLo tablets to the compliance-enhancing gel cap formulation. As a result, in the fourth quarter, we converted tablet inventories on hand to cash. And revenue included a result in incremental amounts of approximately $2.5 million. At year-end, PhosLo inventories with wholesaler customers had increased. These tablet inventories are expected to be depleted throughout 2005. And PhosLo gel caps inventory levels at wholesale customers have remained relatively stable after we brought additional PhosLo gel cap manufacturing capacity online to meet increased wholesaler demand in the first quarter of 2004.

Full-year revenues of Nabi-HB totaled $40 million, an increase of 70 percent compared to sales reported in 2003. Sales of Nabi-HB are directly related to the number of hepatitis B liver transplants in the U.S. Internally generated data indicates that the number of liver transplants that hepatitis B patients in 2004 have increased by approximately 20 percent compared to the corresponding period in 2003. Sales of Nabi-HB benefited from the increase in liver transplants of the hepatitis B patients and from increased pricing that went into effect at the beginning of the year. Offsetting these trends were the impact of changes in treatment protocols for HBD (ph) positive liver transplant patients that have resulted in lower doses of antibody-based products, such as Nabi-HB.

WinRho revenues for the full year of 2004 totaled $47.9 million, approximately 4 percent lower compared to the record sales levels reported in 2003. Fourth quarter sales of WinRho totaled 13.5 million in 2004. Based on internally generated patient use data, we believe patient demand for WinRho in 2004 has decreased in line with the decrease in reported sales in 2004 as compared to 2003. As previously communicated, our agreement with Cangene Corporation to distribute WinRho will end in March of 2005.

Sales of our other biopharmaceutical products include Aloprim, Autoplex T, intermediate products manufactured in our plant and contract manufacturing. These sales totaled $6.2 million in 2004 compared to 9 million to 2003. Sales of Aloprim were lower in 2004. Sales of Autoplex T were consistent between 2004 and 2003. And our contract with the manufacturer of Autoplex ended on May 11 of 2004.

As noted in the introduction, the continued transition to sales of higher margin biopharmaceutical products drove gross margin to $85.5 million or 48 percent of sales for 2004. This increase was after accounting for an increased unused manufacturing capacity expense of $6.6 million, as the plant was idle during the year for renovations to cause it to be EU compliant and inventory reserve adjustments of $3.6 million. Excess capacity expense was $2.2 million in 2003. The increased margin allowed us to fund a two-fold increase in research and development expenses to $61 million for 2004 compared to $29 million for 2003. This increase was in line with our expectations and supported an unprecedented level of clinical and research achievement, principally related to support of our fully enrolled Phase III clinical trial of StaphVAX and establishment of commercial scale vaccine manufacturing capacity plus the completion of three regulatory filings in Europe.

Full-year selling, general and administrative expenses were $55 million for 2004 compared to $43.9 million for 2003. Increased SG&A expense for 2004 were primarily related to full-year selling and marketing expense for PhosLo, initial commercialization activities in Europe, and costs related to implementation of the requirements of Section 404 of the Sarbanes-Oxley Act. Selling, general and administrative expense for 2003 included a charge of $3.3 million related to the retirement of our former CEO.

Other operating expense was $9.2 million for 2004 compared to $4.3 million for 2003. The increase in 2004 is primarily due to full-year amortization of the intangible asset acquired in conjunction with the acquisition of PhosLo. Income tax expense for the year was $10.4 million. Income tax expense reflects income tax related to the realization of the gains for U.S. income tax purposes, resulting from our planned expansion into Europe as well as further tax-related action plans for 2005.

As discussed at our second and third-quarter calls, we entered into a license agreement to market StaphVAX and PhosLo in the E -- EU with a wholly owned subsidiary established outside the U.S. As we also discussed in those calls, we expect that we will use net-operating loss carry forwards and R&D tax credits to substantially offset the future cash impact of this gain in our 2004 tax return.

Now, looking at our balance sheet -- our cash balances as of December 25, 2004 were $103.2 million compared to $115.8 million at December 27, 2003. This is after investing over $25 million in vaccine manufacturing capacity and capability, including an $18 million investment in the Boca Raton vaccine manufacturing plant.

Briefly looking at our 2005 expectations -- total 2005 revenues are expected to be in the range of 142 to $148 million. As previously noted, we reported full-year revenue on WinRho SDF sales of $48 million in 2004. We expect to generate a double-digit increase in patient demand for PhosLo in 2005. However, we are holding our guidance for reported revenues at 5 to 10 percent below 2004 levels in anticipation of -- depleting PhosLo tablet inventories, Medicare-driven limits on future price increases, and the stocking of new competitive therapies. We expect PhosLo prescription growth to be driven by -- increased selling efforts following the conclusion of the WinRho distribution agreement, growth in the dialysis patient population, new revenue opportunities in Europe, active promotion of reimbursement differences between competing treatments, and eventually through the use in chronic kidney disease patients.

Nabi-HB revenues are expected to be level with 2004 levels. We continue to monitor the patient protocol changes that have resulted in reduced usage of antibody-based products, such as Nabi-HB in liver transplant patients and are looking forward to receiving feedback from European and U.S. regulators on our Nabi-HB filings for use in liver transplant patients.

WinRho SDF revenues will continue through the first quarter of 2005. And antibody sales are expected to be -- to total approximately the same levels as reported in 2004.

Research and development expenses are expected to increase by approximately 10 percent in 2005 -- above 2004 levels. This increase will be driven by StaphVAX related costs, the completion of the confirmatory Phase III trial, bridging and consistency elect (ph) clinical trials, completion of immunogenicity studies and a boosting study in preparation for filings of the U.S. BLA.

We will continue to define the next steps to advance our Altastaph clinical program, following discussions with U.S. and European regulators on the recently announced Altastaph results for the completed Phase I/II study in patients with persistent Staph aureus infections. And we will also continue the clinical programs in support of our expanded labeling and usage of PhosLo.

We anticipate that selling, general and administrative expenses will also increase approximately 10 percent over 2004, as we continue to make the investment in initial commercialization operations in Europe supporting the three filings completed in 2004 -- continue our selling efforts in support of PhosLo and prepare for our anticipated U.S. filing of StaphVAX.

Based on our ongoing investment in research and development plus our early commercial activities in Europe, we will report a loss in 2005. Also due to these factors in combination with the end of the WinRho distribution agreement in March of this year, we do not anticipate generating net cash from operations in 2005.

During 2005, we do expect capital expenses to be between 10 million and $11 million. Now, let me turn the call back to Tom McLain.

Mark, thank you. We'd like to now open up the lines to take your questions. And joining us for the question-and-answer session are Henrik Rasmussen, our Senior Vice President of Clinical Regulatory and Medical Affairs, and Raafat Fahim, our Senior Vice President of Research, Technical and Production Operations. We will turn things over to you, Rebecca.

(OPERATOR INSTRUCTIONS). Jim Birchenough, Lehman Brothers.

Just a couple of questions -- number one, just on StaphVAX and the Phase III data that we are expecting -- what's the trigger for that data release? Is it a completion of 8 months of dosing -- 10 months of dosing? Or do we need to follow up following the booster shot to get that data?

I will turn that one to Henrik.

Right. The trigger is basically that the last patient has been followed for 12 months, Jim. That is what the protocol is calling for. And we cannot unblind the study before that has happened -- the 12-month follow-up after the last patient.

Great. And then just on guidance for '05. It sounds like you made the comment that you'll seek external funding for future programs for NicVAX and Altastaph. I just want to confirm that, and then see if you could provide some further detail on what that external funding might involve.

Sure. When we commented on WinRho and the impact of the expiration of the WinRho agreement at the end of the second quarter, we were clear that we believed we had the financial capability to support all of the efforts for StaphVAX. But when we looked at efficacy studies beyond that -- that we clearly would not be able to fund that with operating cash flow.

In the case of NicVAX, I think we have been clear that the funding for all of the clinical studies in the U.S. has come from the National Institute on Drug Abuse. We believe that they may provide an accessible source of funding for the additional clinical studies. And we also pursue other outside funding sources.

With regard to Altastaph, if we go forward with efficacy trials this year, that would have to be a conscious use of cash on the balance sheet or funds that we raised with other means.

Tom Shrader, Harris Nesbitt.

I had a little more detail on the Nabi-HB line. What price increase did you take this year, Mark?

It was just a routine price increase that we took in the early part of the year, which was consistent with what we have historically -- with price limits we have historically done on it. (multiple speakers).

The single digit kind of pricing.

So, if it's up 7 percent, true use is up a tiny bit this year?

Yes, what we had initially expected was actually that Nabi-HB would be down. And then, we actually got an increase. So that was a reflection of the fact that the liver transplants increased through the year.

And the very weak fourth quarter -- that's just in inventory fluctuation from the third?

That is correct. I think we really gauge our full-year performance based on the -- more particularly in that, as I have commented, tracks with the rate of hefty liver transplants primarily.

And do you have a sense -- these alternate treatments using the small molecules -- how much that has accounted for your loss in sales? Is 10 percent about right?

We have not really analyzed it that way, Tom, because it is difficult data to get access to. We just know that those protocols are having an effect. What we will pursue aggressively in 2005 -- and we have as yet see what the impact of that will be. But in fact, on the low dosage protocols, we are beginning to see hepatitis B breakthroughs. And we will see how that can be built into any commercialization effort over Nabi-HB intravenous.

Right. Do you think the label will help reverse this?

We think the label will help us in a few regards. First, that we can actually get into the transplant physician's office and be able to the physician about Nabi-HB and the protocol and significant benefits of treating patients, not only at the time of transplant but on a maintenance basis -- post-transplant with Nabi-HB. We think the labeled indication will create a renewed interest in Nabi-HB. And we're very anxious to have that opportunity.

Okay. Real quick on PhosLo -- I mean, it is a nice number. Do you sense you are taking share from Renagel? Or are you both taking share from the carbonates? You had mentioned earlier that you are going to make a big push in marketing and see if it was working. Where are you in that decision process?

I guess where we are right now -- when we look at -- to compare to 2003, the comparable periods or the last 5 months of 2003 versus the last 5 months of 2004 -- and we are actually seeing an increase in prescriptions for PhosLo that's beyond the increase in the patient population. So our efforts are allowing us to capture more of the market. We believe in total Rx. When we began marketing PhosLo, we were a little behind Genzyme. Now it seems, we are head-to-head with Genzyme. So we have had some affect. But I think we also need to think with that better-than-patient population growth increase in prescriptions that we are also starting to see a piece of the non-prescription, the Tums market, convert to prescription phosphate binders. So we are encouraged by results. This is after only 12 months of marketing the product.

Certainly with Le Roux here, we are going to fine tune the marketing effort and I think in 2005 really line PhosLo up against new Medicare demands, which are not only cost-effective treatments, effective treatments, and ones that can have a positive impact on outcomes in the total cost of healthcare.

So we are actually really excited about PhosLo.

Martin Auster, Wachovia Securities.

I just had a couple quick questions. One for Tom -- I was wondering if you could update us on progress and appetite you guys have in terms of European product acquisitions and what you are seeing out there. And then secondly, for Henrik maybe, I was wondering as you look for fold-ins to the StaphVAX vaccines with Type 336, what sort of regulatory path do you see for that? What do you think is going to be necessary to get inclusion on the label of some of those add-ons?

Martin, on Europe first, our interest really in looking at Europe for product opportunities would be focused on product opportunities that come with a sales presence. We are in 2005 going to build the management infrastructure for Europe that will oversee our marketing and our regulatory and our reimbursement and our clinical operations. And we will build that out.

The fall back plan is that for on-the-field sales presence that we can use a contract sales force. At the same time we proceed down that path, we still have an interest in finding companies that have products and sales forces that would give us the presence in key markets. And we will keep looking for those though that is a challenging order.

Has it been a scarcity of available product or the price? What are the factors that have made it challenging?

Well, there are few companies that have a breadth of coverage in Europe. And the opportunities become market specific. And as we look at that, a contract sales force offers a pretty neat advantage. And that is -- if reimbursement comes first in the U.K. or in Germany or in France, contract sales force can staff us up in those markets versus today trying to make a bet on where that is going to happen. So we are trying to best balance risk and return for investors. And in the process, make the decisions that will allow us to get early success with StaphVAX but also position us to get long-term value for investors. So I hope that made that clear.

Okay, thank you. And then Henrik, in terms of a sense of regulatory path for getting Type 336 folded into the vaccine?

Right, if you're talking about folding activity in 336 into the vaccine, we do believe that it's going to be right into straightforward. In other words, we do not think we are going to need additional efficacy awards. We think that we are already -- we will need to do some immunogenicity studies to show that the combination is well tolerated and also that we are generating the antibody levels, not only against Type 5 and Type 8 but also against Type 336. But as far as -- but we believe that there is going to be interest to allow us to fold that into the vaccine.

The next level, I guess, would be to fold in activity against Staph epidermidis, which is something we also are looking at. I don't think there is any doubt that if we do fold in activity against Staph epidermidis, which as you know, we are very interested to do also of course of the neonate -- the potential neonate application. Then, we would need to do additional efficacy awards. So, 336 immunogenicity would suffice for activity against Staph epidermidis; we would need additional efficacy awards.

Mark Karvosky, Piper Jaffray.

I just had a quick modeling questioning on the PhosLo. Just the actions that converted the tablet inventories into cash -- should we think of that 2.5 million as additional inventory at the distributors now? Or how should we be thinking about that?

At year-end, what we are trying to indicate to you, Mark, is -- because we want to convert the demand inventory -- went into the trade and inventories built in the fourth quarter for tablets. So that's why we wanted to highlight that $2.5 million amount.

Okay. So then, at the distributor level, what should we think of -- I know the end of last quarter, it was 5 to 6 months of inventory. So is that constant, or has that increased a little bit?

No, it has increased because of the increase in tablet inventories in the trade. Now, the tablet inventories would have gone up. And as Mark said, the capsule inventories are essentially remaining the same.

Okay. So is 6 to 7 months fair? Or how should we be thinking about that?

7 to 8 months probably on the tablets.

Okay. And then just finally on CARE 2 -- have you guys opened enrollment of that yet? And have you started following patients?

Henrik is right here.

Right. We have started CARE 2. Patients are being enrolled, and the study is progressing as planned.

Okay. So we should see completion of enrollment in the middle of '05?

I actually -- I don't think we have commented on when we anticipate completion. But we are committed to -- is to setting some preliminary dates in the second half of this year. And we will then follow-up with the EPCT data sometime next year.

Jason Areyay (ph), Gela (ph) Expertise (ph).

Congratulations on a great year. A couple questions -- regarding your guidance, I know you touched on this, let me take it a little further on Nabi-HB and PhosLo. Does that include getting approval in the EU? I think we filed for Nabi-HB in June and for PhosLo obviously in Q4. So that would be less of a dooming (ph) it a 12-month review. And also, does your Nabi-HB number include receiving label expansion? And can you kind of update us on where you see that -- the status of that with the FDA?

Jason, I think as we have commented on calls in the past, our planning for us is really important. Because the margin on product sales defines the cash commitments that we can make in clinical programs. So in setting our plans, we try in that regard to be realistically conservative. So the numbers that we have given you today do not include any revenue results for Nabi-HB or PhosLo in Europe, nor do they include any incremental benefit that we may realize from the Nabi-HB intravenous label. And that really is so that when we make our plans more certain, we've got the cash to pay the cost of the clinical trials that we have initiated.

Got it. It seems that Shire believes that they are starting to take some market share from Renagel rather than from PhosLo. Can you comment on what you're saying with Fosrenol?

While I -- we hear what they are saying, so we see the same thing. And some prescription numbers are starting to come through. What we see also in the Fosrenol marketing is their acknowledgment that the product does lower calcium levels and their recommendation that calcium acetate or calcium carbonate be used in conjunction with Fosrenol in setting the binder therapy guidelines for their patients. So that for us actually is an encouraging development as well.

And regarding your 3 EU MAA's -- have you received any communications from the EU regulators on either PhosLo, Nabi-HB or StaphVAX? And is your StaphVAX application at all contingent on the U.S. Phase III study?

Sure. The only comment that we have made on our European filing is the fact that the StaphVAX filing was accepted by regulators in Europe. And it is our policy and practice not to comment on the status of questions or responses back and forth during this review process. And then to answer your question, Henrik will contradict me if I say something the wrong way, but no, the filing in Europe is not contingent upon the outcome of the Phase III study of StaphVAX in the United States.

And sorry, last question just to circle back to something earlier, Tom. Regarding your discussions with the U.S. regulators on Nabi-HB expanded label, can you just update us? Obviously, it seems to be taking them quite a while. I know that you resubmitted in Q4 some more data to them. Any idea where that stands?

What had happened was -- they had requested additional data in 2004. We had supplied that data in December of 2004. And now, we are back in the review cycle for that, which is a 6-month review cycle of that new data.

Okay. So 6 months, the clock started in December.

And it is data that we believe was responsive to what the FDA had asked. And if you will recall, when we had received the request in the second quarter, what we had characterized it at. And as a fair characterization, it was looking for extended follow-up data of the same patients in the clinical studies that had been part of the original application.

Well, it looks like you are going to have a busy year this year.

It is an exciting time. I think we are up to the challenge. We're looking forward to it. Thanks, Jason.

Scott Marks (ph), Finity (ph) Capital.

A couple questions -- you said that the StaphVAX data was coming late '03 or early Q4. Is that a difference from what you said before?

No, that is what we said all along. But what I want to be emphatic about as well, which we have said all along, is we want to look for a conference opportunity or an investor meeting at which to present the data.

Okay. And these other studies you're doing, these do not change the timeline of data or filing, do --

No. Basically, what we have done is affirm timelines that I hope have been communicated clearly in the past.

Tom Shrader, Harris Nesbitt.

I just had a follow-up on something I wasn't sure I caught. When you said 7 to 8 months of inventory for PhosLo that is of tablets?

Tablets only.

And that's what fraction of the total?

It is probably more than half right now. Because that had been the dominant product, and gel caps is the one that --

Why do people hold on to that? Why are they still using that? Does it make any sense?

Well, one of the big reasons is -- it is one product that is covered under our federal supply contract. So for a lot of long-term care patients, tablets are what is prescribed. And I think there are just physicians who knew -- have known PhosLo tablets since 1992, and they keep prescribing it.

And obviously, what is important about the gel caps conversion is -- there are significant compliance benefits to the gel cap formulation. We think that will actually result in better control of phosphate levels on an extended basis. And certainly, we're going to continue to get that message out this year. And we hope benefit from that enhanced compliance as well in the long-term.

When does that contract run out? When could you swap that contract?

Well, when the tablets are converted, the gel caps are covered under the contract. There is a pricing advantage though for the tablets under the contract, as it is written. So they will continue to prescribe or use those as long as the tablets are available.

And a question for Henrik -- on the CKD trial, Henrik -- would that be a placebo-controlled trial? There really is no standard of CARE there.

Yes, it is going to be double-blind placebo-controlled randomized study, looking at the effect obviously on serum phosphorous levels.

So, it would just be phosphate levels? It wouldn't be GFR or something long-term like that?

Well, we're looking at a whole ratio. The primary endpoint is going to be serum phosphorous. But we are obviously looking at a whole range of secondary endpoints.

Do you think there is a chance it is long enough to see a GFR effect?

It wouldn't be good to follow them up with that long-term. What we are planning -- and that was at the request of the FDA -- is a 26-week follow-up. But I do not think that it is likely that we are going to see a significant influence on GFR.

Lee Chong (ph), (indiscernible).

On StaphVAX, you reported in December the overall infection rate about 3 percent and over. And that is satisfactory. But between now and the unblinding of the data, would you have other interim looks at the absolute infection rate?

I will let Henrik answer that.

We don't plan to -- any additional looks. We just wanted to make sure because we knew that it was an important issue on a lot of investors' minds. We wanted to make sure that we were where we thought we were in terms of the overall event rate. Because if you look at things which could prevent us in principle from hitting our primary endpoints -- if there was some unexplained demographic reduction in the event rate of that (indiscernible) that obviously could influence our power calculations. So that was why we took a look at it.

We were very confident that -- obviously based on what we saw. We were exactly at the same level as we had been in our first Phase III study. And we were exactly at the level where we had anticipated when we powered the Phase III study. So there is no need for us to do any additional looks. And we don't plan to do so.

Was that decision back in December to look at the absolute infection rate -- was that a decision made by a third party or by an independent board or actually decided by you?

That was something that we wanted to do. And it really came from the fact that in the Altastaph neonate trial, we had been surprised by the low incidence of infection in the neonate population at 3 percent, which was half of what had been observed in the literature.

And after that and based on questions that we had received from investors, we knew that it was an open question and that it would be valuable for us to look at the blinded data simply at overall infection rates and provide some assurance to investors that there will be enough events in this study from which to be able to draw a meaningful conclusion as to whether or not StaphVAX is preventing the infections.

Okay. Great. On the house maintenance financial question, the margin for the quarter dropped quite a bit. Do you attribute that to the shortfall in Nabi -- relative with numbers on Nabi-HB alone?

No. I commented in my remarks to some inventory adjustment. And that's what that -- I would attribute that to.

The inventory reserves figure that Mark commented on was somewhere in the range of 3 million.

$5, $6 million.

Jim Birchenough, Lehman Brothers.

Just two follow-up questions -- just as a reminder -- just want to make sure that the endpoints in Phase III is reduction in Type 5 and 8 infections, not all 5 Staph-oriented infections, right? We're not including 336 and epidermidis in that endpoint?

Yes, you are right. In terms of the primary endpoint in the study is the event rate of Type 5 and Type 8 at the 8-month time point. We do have a whole range of perspectively (ph) defined secondary endpoints, which include not only Type 5 and Type 8 but all Staph aureus infections. And not only the 8-month time point but also the 10 and the 12-months time point. So that is all perspective in finding the protocol as a secondary endpoint. But the final endpoint -- Type 5 and Type 8 at 8 months.

And then just following up on PhosLo -- if we can look ahead to 2006 and Part D reimbursement -- just wondering if you could spend a moment on what you see right now with Medicare patients and use of phosphate binders and how you see that changing in '06? And also, just interested in the comment on pricing constraints -- ahead of potential Medicare imbursement, given that you still price at a deep discount to other phosphate binders. I'm just trying to understand the price constraints going forward.

Certainly, as I'm sure you watch and everyone watches with great interest, the developments out of CMS as we prepare for Medicare Part D. Clearly, what is being set up is an expectation that products must have not only efficacy, but that they will also look at cost-effectiveness of the treatment. And we believe in this respect that PhosLo has unique advantages. That it is the superior phosphate control product on the market. And as you have noted so well, that it is at a significant discount to the cost of other prescription therapies. So we certainly are very encouraged about the prospects for PhosLo under the 2006 Medicare Part D.

What we were alluding to as to pricing opportunities -- Medicare has been very clear that as of September 30th of this year, that will be the price point which will be the basis for any future increases. Which I think most companies expect to be limited to some kind of cost index. And the type of pricing flexibility that you may have in non-Medicare based patient populations won't be available to you in the Medicare group. And clearly with a product like PhosLo, which well over 90 percent of our sales today are in Medicare and Medicaid patients, that will limit pricing opportunities in the future.

Great. Just so I understand -- the constraint is really up to September -- beyond that point, it is going to be hard to -- you won't be able to have any further price increase. But you are not suggesting you're constrained before that point?

That is correct.

Thanks for taking the question.

You are very welcome. And I would like to thank everyone for your participation today and for the questions and your interest in Nabi Biopharmaceuticals. 2005 is certainly a very significant year. And we look forward to updating you on our progress in future calls. Thank you very much.

That concludes today's Nabi Biopharmaceuticals teleconference. You may now disconnect.