Vaxart Inc (VXRT) 2005 Q1 法說會逐字稿

Good afternoon. My name is Brooke, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Nabi Biopharmaceuticals’ first 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. If you would like to ask a question during this time, simple please press star, then the number one on your telephone keypad. Should anyone need assistance at any time during this conference, please press star then zero and an operator will assist you offline. As a reminder, ladies and gentlemen, this conference is being recorded today, Wednesday, April 20, 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.

Good afternoon and welcome to the Nabi Biopharmaceuticals conference call and webcast to review our first quarter 2005 operational and financial 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 European Union and the United States may not be successful; the possibility that we may not realize the 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 full utilize 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 25, 2004 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, April 20, 2005. 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 p.m. Eastern time on April 27, 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 5:00 Eastern time on April 27, 2005.

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

Mark, thank you. Straightforward communication is always a priority for us. In my comments today, I would like to first focus on the convertible debt offering that closed yesterday. In conversations and meetings, some of our new and long-standing investors have expressed concern about the timing of this financing. I would like to answer two questions: why and why now.

First, to address the why. As we have discussed previously, we have a multi-year strategic plan. And at its core are our efforts to develop and launch an innovative portfolio of products to prevent and treat Gram-positive bacterial infections. The progress on our lead product, StaphVax, has been significant and it has been our primary focus for several years. Today, we are working towards licensure in Europe. We are on target to complete and announce results from our second Phase III clinical trial and to file our license application in the U.S. in the second half of this year. Our business model has been innovative in our industry as well to fund these activities with cash flow from product sales. Last year, we disclosed that our agreement to distribute WinRho in the U.S. would end in March 2005. That made it impossible to fully fund the activities for the continued development of StaphVax in the U.S. and its launch in Europe relying only on operating cash flow. We stated that in 2005 we would invest cash on our balance sheet to meet those goals. As we continued through 2004, we also made progress in advancing another important objective in our strategic plan: progress with other programs in our Gram-positive product portfolio, specifically Altastaph and next generation vaccine and antibody products. These are important objectives that will position StaphVax and Nabi as a market leader in fighting Gram-positive infections.

As we have discussed, the existing technology for StaphVax is under an exclusive license from the NIH that extends through 2010. While that provides an important early lead in defining and addressing its significant market opportunity, it does not guarantee we will keep that leadership position. To date, we are not aware of any competitive vaccines in the clinic, but it is strategically important to advance Nabi’s proprietary antigens for next generation vaccine and antibody products. First and most importantly, these are products that will deliver expanded protection against staph aureus, staph epidermidis, and ontericocus (ph). These bacteria account all of the clinically significant Gram-positive infections in hospitals today. But these products will also help to protect the value of what we have already accomplished with StaphVax and they will also expand its value by building in our patent positions on these next generation antigens. By aggressively expanding the scope of our program and enhancing our IP position in the process, we will build value in StaphVax today and build value for the future.

Beginning additional clinical trials in 2005 is vital to helping us understand how we will develop and manufacture a multivalent vaccine with single or multiple carriers, for example, with the goal of optimizing the immune response. These studies and building these results into our development plan have a lead time, and our development plans target introducing the next generation vaccine to the market prior to 2010. Second, Altastaph is quickly developing into an important product technology that compliments StaphVax and one that can synergistic with StaphVax as well. As we all know, StaphVax can provide long term protection, and it takes as little as seven to ten days after injection to develop high levels of antibodies. In contrast, Altastaph could provide immediate short term protection if you can’t wait for StaphVax or if you can’t respond to a vaccine. And as we learned from results of the clinical study announced at the beginning of this year, Altastaph could also be developed for treating persistent staph infections. This is significant as in the U.S. alone more than 160,000 patients will be treated for a staph infection this year.

We also believe that advancing the manufacture of a multivalent Altastaph to prevent infections is strategically important in 2005. This not only will give us important competitive advantages compared to other products under development, but there is also the reality that it is often faster to advance next generation antibody products into efficacy trials, perhaps ahead of vaccine efficacy trials. Therefore, manufacturing a next generation Altastaph product and continuing the development of Altastaph to treat infections are priorities for us this year.

Further, the results of clinical studies indicate that even when antibiotics may appear to have worked in treating infections, the recurrence rate can be as high as 30 percent. This has defined an opportunity for synergy, for combination therapy: Altastaph with the antibiotics to treat serious infections, then StaphVax to prevent relapse. These significant advances continue to define not only how we can develop this portfolio of products, but also how we can begin to define a Gram-positive infections franchise.

As we have discussed previously, the next steps in developing Altastaph in the broad Gram-positive infections program has to be funded with new cash resources. And we plan to use proceeds from last week’s financing to support these efforts this year. We have also been clear about our desire to pursue business development opportunities. Our focus continues to be on late stage or marketed products aligned with our strategy. We’re interested in expanding our presence in Gram-positive bacterial infections, in neurophology (ph), and in transplant surgery. We are also interested in opportunities to build or expand our commercial presence to support the launches of StaphVax and Altastaph. Funds from the transaction completed yesterday position us to be able to continue to pursue these opportunities in 2005. And finally, if there is an unanticipated delay in the licensure of StaphVax in Europe, this transaction helps to provide additional financial flexibility.

Next, I would like to address the second question: why now? As I have already tried to highlight in the discussion of why, each of these activities is time sensitive. Each is tied to realizing the value from what we are already developing with StaphVax. And as we all understand, it is unusual for a small company like Nabi to be ahead of large, well-financed companies in addressing an area of major medical need. In a competitive environment, a few months can make a tremendous difference in the value you are able to ultimately realize. Another product may advance rapidly or a competitor may make a decision to enter the market based on your hesitation or your inability to proceed because of finances. We have established a leadership position, and we have great confidence in the outcome of the StaphVax trial. In 2005, we needed the funding to act on opportunities that build additional value in this area.

As you are aware, last year we filed a Shelf Registration with the SEC for up to $175 million in financing transactions. While we had no immediate intention to raise funds, the Shelf Registration would have allowed us the flexibility to access markets when conditions would be favorable. As you are also now aware, the SEC reviewed our filing and we entered into an extended discussion about the accounting for intangible manufacturing assets. As a result of our review of this area, we determined it was appropriate to restate our accounting for the Dow (ph) manufacturing and tangible assets in 2002 and 2003, and we made that restatement at the end of February. The restatement had no effect on our 2004 results of operations, but we could not consider any financing transaction during that period. But Nabi continued to make progress during that time.

After this matter was resolved with the SEC, we quickly worked to reconsider financing options and our business strategy. Market conditions directed us to focus on a convertible debt offering. In reaching the decision on timing, we assessed the impact of a transaction now versus the impact of waiting to advance these programs and the uncertainty of market conditions later in the year. We placed a priority on the certainty of having the financial resources to advance these important elements of our strategy now. That meant that this transaction was completed in less than optimal conditions, in reality just before markets would have closed to us. A financing later this quarter did not appear feasible based on worsening market trends. And we believe after this quarter would simply have been too close to the Phase III trial results.

If we waited, we would not have been able to commit to the development programs that are vital to expanding our leadership position in Gram-positive bacterial infections, and at the same time to protecting the value of what we have developed to date. The feedback from many of our investors has been difficult, but it has also been helpful. We have listened carefully. And it is perspectives that will be incorporated into our plans for the remainder of this year and for the future. Our commitment to you has not changed. To take the actions that will achieve our near term and long term goals, we will continue to execute against what we believe is a well constructed strategic plan that can meet patient needs, provide opportunities for our employees, and deliver a strong return for our investors. While it is not possible to always align with the objectives of all stakeholders at all times, we will continue to put forth our best efforts.

Because of the time I have spent on reviewing the convertible debt financing, I would now like to just briefly highlight progress on our major value drivers for 2005. In many ways, we are still a development stage company. In 2005, we will continue to advance towards a major transformation of events for us -- the approval and launch of StaphVax. Today, I will focus on key elements of that transformation -- the European approval of StaphVax, commercialization in Europe, the confirmatory Phase III trial in the U.S., and PhosLo.

We will respond to comments from the reviewing countries in Europe, referred to as the [inaudible] during the year. When the comments are received, we have a six month window in which to respond. It is customary to not comment on specifics with regard to the review comments. However, if a company will not be able to respond in six months, it is required to announce it is withdrawing the application and then to resubmit it when the responsive data is available. In this case, no news will be big news. Also, in response to questions we have received in the past, it is reasonable to expect that the results of our confirmatory Phase III study will be announced during the review period.

Our efforts to establish commercialization in Europe continue to progress. As announced this past December, LeRoux Jooste has joined Nabi as Senior Vice President, Global Sales and Marketing. LeRoux brings global experience and marketing expertise that will be critical to this important effort. Our focus for Europe is on three elements today: completing the reimbursement study in major immune markets; hiring medical science liaisons -- that is physicians -- and help economists who will make the case for using StaphVax in hospitals and affiliated dialysis centers; and hiring a contract sales organization to manage the physician sales calls. We are making progress in all areas. Next is an update on our Phase III clinical trial. We are on track to complete the 12 month follow-up period in August. We continue to project that we are on target to close the database and analyze the data in order to report top-level results at a major medical meeting or an investor meeting in New York around the end of the third quarter. Data from the immunogenicty trials and the bridging and consistency lot studies should be available in the second half of this year. This timeline leaves us on schedule to file our BLA before the end of the year.

As indicated previously, we are also working hard to be able to include clinical data from StaphVax manufactured at our new vaccine facility in Florida. If that is not available in time, we will make a decision whether to wait to file only if it is a short delay, or to file the data as a later supplement to the BLA.

Finally, an update on PhosLo. This is an increasingly competitive marketplace. Our efforts in 2005 are focused on three key groups -- the treatment team, thought leaders, and reimbursers. Today we encourage that PhosLo’s advantages are being recognized. This is evidenced by new prescription trends and end user demand. PhosLo new prescriptions are at approximately a 45 percent share and are demonstrating stronger week over week growth in the computing prescription therapies. And in looking at patient demand growth in terms of bottles pulled through the distribution channel, patient usage for PhosLo has increased 8 percent on a moving annual total basis. Patient usage in the first quarter was up nearly 10 percent over the first quarter of last year. And most significantly, patient usage in terms of bottles has increased 3.4 percent over the fourth quarter of 2004. This growth from the fourth quarter is running ahead of our internal projections.

Our efforts in the field will only intensify as we double the number of sales calls on PhosLo after the conclusion of our WinRho distribution agreement. And in addition, the Care 2 study evaluating PhosLo plus Lipitor versus Renagel (ph) plus Lipitor will continue to enroll patients. Preliminary serum level data on lipid phosphate, calcium, and calcium phosphate product levels are anticipated later in 2005. Data for the primary end point of the study, arterial calcification, are expected to be available in the second half of 2006. And to support the longer term growth of PhosLo, we are enrolling patients in a study in a chronic kidney disease. Our goal is to expand our label to include the significant and growing CKD patient population in the U.S. and Europe. With that operational overview, I would now like to ask Mark Smith, our Senior Vice President, Finance, and CFO, to highlight our financial results for the first quarter. Mark.

Thank you, Tom. Total sales for the first quarter of 2005 were $26.1 million, including $17.5 million of biopharmaceutical revenue. Consistent with the first quarter sales result and the increased investment in research and development, we reported a net loss of $15.8 million, or 27 cents per share for the quarter. Sales of PhosLo totaled $3.8 million in the quarter. As previously reported, in planning for 2005, we made a strategic decision to aggressively convert the market from PhosLo tablets to the more compliance-enhancing gel cap formulation. During the first quarter, overall wholesaler inventories of PhosLo were reduced. You’ll recall that in the fourth quarter we made a decision to convert a significant portion of our tablet inventory on hand into cash and sold it into the wholesaler pipeline. This action increased our reported sales by approximately $2.5 million in that quarter. As tablet inventories are depleted, we expect these inventories will be replenished with PhosLo gel caps. But as Tom described, third-party patient prescription data supports a solid increase in end user demand for PhosLo, both among new prescriptions and in terms of inventory pull through at the patient level from wholesalers.

As a reminder for comparison purposes, first quarter 2004 sales of PhosLo benefited from initial stocking of the gel cap formulation, rather than bring online (ph) increased capacity. Based on the continued strong end user demand, we expect that full year sales of PhosLo will total between $33 and $36 million for 2005.

Sale of Nabi-HB were $6.7 million in the first quarter of 2005. First quarter sales were lower than the corresponding period from last year due primarily to lower Hepatitis B liver-positive transplant activity. We believe that the trend from the first quarter is a short term reduction, and not due to a fundamental change in how livers are allocated for transplants. Furthermore, given the increasing incidents of Hepatitis B infection breakthroughs associated with low dosage treatment protocols that have been reported, we maintain our expectation that sales of Nabi-HB will be approximately even with 2004 levels of $40 million in 2005.

Sales of WinRho SDF totaled $5.8 million in the first quarter. As we had previously discussed, our license and distribution agreement with Cangene ended on March 24, of 2005. Sales of our other biopharmaceutical products were $0.9 million in the first quarter of 2005 compared to $2.1 million in the first quarter of 2004. Sales levels in the current quarter primarily reflect the introduction of a competitive product Aloprim in 2004 and completion of the Autoplex T distribution agreement in May of 2004, offset by increased contract manufacturing revenue.

Total antibody sales were $8.6 million in the first quarter, compared to $12.4 million in the first quarter of 2004. Non-specific antibody sales were $3.7 million in Q1, compared to $6.3 million last year as we reduced production of these products in our centers and increased specialty plasma production. In keeping with our strategic focus for this segment of our business, we’ve increased production of anti-HBs plasma in 2005 and retained it for manufacturing of future lots of Nabi-HB. Anti-HBs plasma is the primary raw material in the manufacture of Nabi-HB. We also sold less ROD (ph) plasma in the first quarter. This reduction was expected due to the expiration of a [inaudible] contract to supply this product in December 2004.

Gross margin for the first quarter of 2005 was $9 million. Gross margin included an excess capacity expense of $2.1 million, compared to $3.4 million in 2004. The reduced excess capacity expense for 2005 reflected increased utilization of the plant foro manufacture Nabi-HB and contract manufacturing in the current quarter.

Research and development expenses were over $15 million in the quarter, increasing by approximately 33 percent compared to the first quarter of 2004. Research and development expenses were driven primarily by costs associated with our Gram-positive infections program, with almost 90 percent of research and development being assigned to these activities. Our focus within this program was primarily to enhance the StaphVax clinical program in preparation for filing of our StaphVax BLA by the end of 2005, including costs for ongoing development of vaccine manufacturing capabilities at our facility here in Florida and at Cambrex’s (ph) facility.

Selling, general and administrative expenses increased to $14 million due to costs related to selling, marketing and commercialization activities associated with our European plant, as well as increased employee benefit costs. Other operating expenses were $2.3 million for the quarter and were comparable to 2004 same quarter totals. These expenses primarily reflect amortization of intangible assets associated with the acquisition of PhosLo. For the quarter, we are reporting an income tax benefit of $6.7 million at an effective rate of approximately 30 percent. Our tax benefit reflects the planning activities we anticipate undertaking in 2005 [inaudible] feasible improvement and for which we recorded a deferred income tax benefit in 2004.

Turning to our cash position. At the end of the first quarter, we had total cash assets including marketable securities of $71 million. This compared with $103 million at year end. This decrease was expected due to the use of cash in our 2005 operations as we increased our level of investment in research and development activities and initial commercial activities in Europe. Further, at year end, we reported a number of liabilities that were required to be paid in the first quarter including royalty and product expenses due Cangene under our distribution agreement, sales related deductions, costs related to establishing vaccine manufacturing, both in our facility in Florida and Cambrex’s facility, and employee compensation payments.

Finally, during the first quarter, we paid $9.5 million to Brain Tree Laboratories under a note payable pursuant to the acquisition of PhosLo. As of quarter end, we have an outstanding balance of approximately $14 million under this agreement. Over the balance of 2005 with the end of WinRho distribution agreement and our investments in completing the StaphVax clinical program, initial commercialization of StaphVax, PhosLo and Nabi-HB IV in Europe, we anticipate continued use of cash from operations, although at a lesser rate. Factors that will contribute to reduced cash use in future periods are expected increases in sales over the final three quarters of 2005 compared to the first quarter, and completion of the Phase III trial in the third quarter.

As we define the next steps to the development of Altastaph and next generation vaccines, we may increase our cash investment in subsequent quarters.

Moving to our outlook. For 2005, we maintain our full year revenue guidance for total sales between $137 and $143 million. With that, pharmaceutical revenues expected to total between $88 and $91 million. Our previously announced guidance of PhosLo and Nabi-HB is also unchanged, with PhosLo revenues expected to be between $33 and $36 million, and Nabi-HB revenues expected to be level with 2004 totals. Research and development expenses are expected to increase by approximately 10 percent from 2004 levels of $60 million, driven by a cost to complete the confirmatory Phase III trial, bridging inconsistency lab studies and the completion of immunogenicty studies in other at-risk populations such as orthopedic and cardiovascular surgery patients.

With the completion of our financing this week, we anticipate that research and development expenditures will increase as we define the appropriate clinical trials to Altastaph and next generation Gram-positive products. We continue to anticipate that SG&A expenses will also increase approximately 10 percent from 2004 levels of $55 million as we continue to support the initial commercialization activities in Europe for StaphVax, PhosLo and Nabi-HB. And we anticipate that our effective tax rate for the full year will be approximately 25 percent to 35 percent on a GAAP basis. Our effective tax rate will be impacted by our international activities and planning actions between our U.S. and international subsidiaries, as well as current year operating results.

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

Thanks, Mark. We’d now like to open the lines for you to ask questions. Joining Mark and me 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.

At this time, I would like to remind everyone if you would like to ask a question, please press star then the number one on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster.

Your first question comes from Mark Schoenebaum with Bear Stearns.

Hi, how are you? Thanks for taking my call, and thanks, Tom, for the thoughtful, candid comments around the financing last week. My question -- one of my questions is: can you comment -- I know you haven’t provided guidance, obviously, but can you help us all think about what your financing needs may be between now and a StaphVax launch? And I realize that you haven’t given guidance, but perhaps if there’s anything that you can -- if there’s any color that you can fill in around the thinking that might go into that and help us with our models, that would be, I think, very helpful. And then I had a clinical question or two.

Okay. And the question there, Mark, is needs for additional financing?

Yes. So when I think -- when I’m looking at the model and I think between today -- that is after the recent financing -- and through the StaphVax launch, you know, we’re obviously trying to figure out will you need another financing. Obviously, things happen and opportunities present themselves. But can you help us think through that? Will there be an additional financing between now and the StaphVax launch?

Looking at our projections right now, Mark, the only type of opportunity that could require additional financing would be something of a business development nature and that for the clinical studies that we believe we need to do in 2005 and the work on the Gram-positive portfolio that with this transaction, we have what we need.

And you spoke a little bit about areas that you were at looking at biz dev, but can you talk more about what your specific criteria are for that?

They remain very much the same. We’re looking for things that would be at a very late stage of development or something on the market, if we’re talking in terms of a product technology opportunity. And if it were an opportunity to help build presence in a market in Europe, as an example, it would be a sales opportunity that that sales force would come with marketed products, there would be a cash flow associated with that today. And those are things that we try to prioritize as we look at all opportunities.

Okay. So it will be clear -- a marketed product would have to be cash flow positive, correct?

Well, we liked PhosLo and we would like to look for opportunities that are cash flow positive. We don’t need to look for opportunities to burn more cash flow. That’s right.

Okay. Great. And Henrik is there?

Yes, I’m here.

Hi, Henry. How are you? You’re unusually quiet, so I -- but I just had a -- if you don’t mind, I had one question for you. I have lots, but I’ll just ask one and get back in the queue. And that is: the most common question I get about the StaphVax trial is, you know, how will the current pivotal trial in StaphVax teach clinicians how to use the vaccine in year two and beyond? And when you -- you know, when the FDA ultimately is sitting down to write a label, how do you expect them to write language around that question?

Right. What we have incorporated obviously in the confirmatory Phase III study is taking a booster dose at eight months. So we anticipate that certain [inaudible] of the initial label is going to provide guidance for how to treat these patients for the first two years. Beyond that, we are actually going to gather more data as to how to continue to treat those patients beyond the initial two years. And those data are going to be made available before anybody actually would get down to the need for treating them beyond the initial two years because we fully recognize, and obviously the regulators are going to recognize that as well, that for certain indications such as in-stage renal disease, these patients are at chronic ongoing risk and they’re going to require chronic ongoing protection. So the initial application is going to cover for two injections, which covers them for the first two years and we are going to generate data beyond that.

Okay. Great. I really appreciate it. Thanks a lot, guys.

Your next question comes from Jim Birchenough from Lehman Brothers.

Hi, guys. Just to follow-up on Mark’s question and then a few others. Just to be clear: to the extent that any business development opportunity that you pursue would look to, I guess, synergize with opportunities for StaphVax in the U.S. and Europe, is it safe to assume that you would wait to get some, I guess, clarity on how that’s going to play out from a European and U.S. regulatory perspective before you make any move in business development on other products?

I think it would be entirely dependent on what the opportunity is, Jim. And it’s hard to make a blanket statement for all situations. But obviously, what we would be looking for are opportunities that build value in terms of synergies with what we are already advancing within the strategy. I’m not trying to be evasive. It’s just impossible to give a catchall answer on that one.

Okay. And just a couple of questions on PhosLo. I’m just wondering if you can give us a sense in terms of tablet and gel cap inventories, where we’re at right now. And I just want to make sure I understand that any further drawdown in tablet inventories you expect would be replenished with gel caps. Is that right?

That’s correct. Our assessment right now would indicate that in terms of months of inventory in the trade that gel caps are the same as what we saw at year end and that the tablet inventories have been drawn down by somewhere between two and three months during the first quarter.

And I’m just -- one other question on PhosLo in terms of pricing. Did you take a price increase this quarter? Do you intend to take DCOR (ph) date play into those decisions?

We have not taken a price increase. We have a practice of not commenting on future price increases. And we believe that the efficacy advantages of PhosLo that are strong and demonstrated with clinical data and the value of PhosLo versus Renagel, that it would not prevent us from taking a price increase.

Okay. And just one final question on StaphVax and I’ll jump back in the queue. Am I to understand that the Phase III that’s ongoing, there will be some monitoring of patients after the booster to assess when a further booster might be necessary? And are you monitoring [inaudible] and then determining when the best point in time might be to provide future doses? I don’t know that I’m clear as to how follow-up data is going to provide guidance on future dosing.

Sure. And Jim, just before Henrik answers that, just to jump in. What we’re talking about with this longer term follow-up and the effective booster is that’s typically what’s done with all vaccines in order to define how it would be used on a chronic basis. And that’s the post-marketing kinds of studies that Henrik is alluding to. And Henrik, I’ll let you take it from there.

Yes. It’s important to emphasize, Jim, that the initial study is going to complete once the last patient has been followed for 12 months. So those are -- and that will include the initial injection plus one dose at eight months. Those are the data which are going to be submitted to the regulators by the end of this year. In addition to that, obviously we have already given these patients two injections, so it’s relatively easy to go beyond that in a similar protocol and take a fraction of these patients and give them a third and a fourth injection. But it’s going to be a similar protocol, although it will involve some of the patients who received -- who participated in 1371. But it’s all the same. A lot of those data are going to be generated after StaphVax has already been approved.

And because we will continue with those patients immediately, we’ll actually be gathering that extended data while the license application is under review by the FDA. And we would expect to have some of that answered before it’s commercialized, and certainly extended booster protocols answered long before a patient would need it.

Right.

Great. Thanks for taking the questions.

Okay. Thank you, Jim.

Your next question comes from Jason Aria (ph) with Jolla (ph) Equity.

Good afternoon, gentlemen.

Good afternoon, Jason.

A couple of questions. Tom, could you clarify about the MAA, you had discussed that six month post-filing, which I guess would be sometime in late May. What does that mean once you eclipse that mark?

Well, if you go out to the EMEA website, what they would tell you is that after your application is accepted that there’s a set period, and that’s usually four months to receive the formal questions back from the reviewers of your application. And as we’ve told you, our application was accepted in January. When we receive that information, then you have six months in which to respond to their request for additional information. If, when you look at the questions, you assess that you cannot respond in that six month period, you’re obligated to withdraw the application and then to resubmit when the responsive data is available.

Got it. So obviously you determined back in January that you could respond within six months then?

Well, we don’t have -- we wouldn’t receive the -- we had -- in January, by accepting the application, they affirmed that we had provided sufficient data from which to judge whether or not to license the product. Since that time, they’ve reviewed the application. We will receive their questions or request for additional data four months after that, which would be in the May timeframe. And then it’s when we receive that that we then make the assessment, can be responsive in that six month window.

Got it. Thank you for making me not so thick on that.

Sure.

A few other questions. Timing of the at-risk StaphVax trials in cardiac and orthopedic surgery. Do you expect those similar -- to similar late Q3 to the ESRD?

Yes. We said -- we’ve completed the enrollment in the cardiothoracic surgery study and the enrollment in the orthopedic trial is ongoing. So we said results in the second half of the year. Obviously, results for cardiothoracic surgery will be available ahead of orthopedic surgery, but in all cases in time to be included in the license application at the end of the year.

Okay. And so from the filing standpoint, from the label expansion standpoint, you’re saying you’re going to include it in the ESRD filing. I would assume then that you would expect to get approval on the label for all three indications.

Well, we can’t project that. What we understand from our discussions with the FDA is that clearly we will have comprehensive data about the benefits of StaphVax in preventing infections in dialysis patients. What we have also spoken with the FDA about providing is additional data in other patient populations to show immune response and how it compares to the immune response that will have been proven effective or protective in dialysis patients, as well as additional data that would support that dialysis patients in fact are a worst case patient population for an immune response and a vaccine, and also that the way infection is cleared in a dialysis patient will be the same mechanism of clearance in these healthier surgical patients. The FDA has indicated that it is reasonable given that data for them to consider a broader label, but whether or not we achieve a broader label will depend on the quality of the additional data that we submit.

So we certainly believe there will be more than enough data for an ESRD or dialysis patient indication. We certainly will work hard to provide high quality data in the hope that the FDA will find that persuasive and grant us an indication that extends beyond those patients.

So ultimately then, Tom, you’re almost stating here, I guess, that all three trials, assuming obviously the ESRD as the lead, is positive, that all three trials, depending on their outcomes and the strength of their outcomes could be pivotal trials.

Well, the immunogenicty studies, I guess, we wouldn’t technically call a pivotal trial, but they provide data that’s supportive in demonstrating that what you’re seeing in the worst case dialysis patients should be able to be repeated in other at-risk patients. And Henrik, if I’ve said anything wrong, why don’t you correct me now?

Henrik, let me just jump in and ask a quick question then. I guess when I’m using pivotal, what I’m saying is you wouldn’t have to conduct a large -- additional large pivotal Phase III trial in orthopedic and cardiac --and/or cardiac if those two came back strongly positive and you thus got those in your original label along with the FRD. That’s where I’m going with the question.

Right. Right. Right. No. And as Tom indicated, obviously it’s going to depend on the strength of the data at the end of today. And it’s going to depend on the FDA’s assessment of those data. But certainly our hope -- and the argument we are going to try to make in our label submission is that those two data -- from those two immunogenicty studies should be adequate to allow us to get broader label. And if the FDA accept that, then there would be no further need for additional pivotal studies.

Great. And let me just lump, I guess, four into one here. Tom, you -- I guess your -- kind of the criticisms of Nabi surround the acquisition of PhosLo and whether that was truly value added, especially in light of the inventory issues we’re going through now, and whether there is in fact real at least domestic growth in that product. And then the potential of all the staff and should the company be spending considerable funds like you just raised on Altastaph. The risks associated with the development of NicVax and I guess the risks reward merits of that program. And then lastly, your self-commercialization of StaphVax. Could you just -- sorry to lump them all together, but could you just kind of address those and your thoughts on those four issues?

With regard to the acquisition of PhosLo, clearly we think it has been a commercial success for us to date. It is delivering a positive operating cash flow, and it is contributing to the support -- the cash support for the ongoing clinical studies that will launch StaphVax. And certainly with the returns that we are generating, that from a financial standpoint, it’s been a very important product, just with that in mind. But certainly, as well, it’s delivered on the other value that we had defined, the relationships that we’re developing with a naphrologist (ph) today that are going to be very critical to the early uptake of StaphVax and that will certainly be apparent when StaphVax is approved. The fact that we’re gaining important market knowledge, that we are in this market against very tough competitors, what we are learning and how we are developing will only increase our success with StaphVax when it launches. It’s a product that -- antibiotic sales and marketing people are not going to want to see on the market, so that’s been very important as well.

And PhosLo is going to create important synergy for what we will do with StaphVax in Europe, and it’s been a tremendous enabler there. Altastaph, clearly when we look at the results that we’ve had with StaphVax and now what we’re really positive results about antibodies treating persistent infections, that really has told us that there is tremendous value in the Altastaph program. It’s not a different mechanism of action; it’s the same mechanism of action, and what it’s done with the results from the treatment study is define that there truly is a franchise opportunity here, that with vaccines and with antibody-based therapy, we can uniquely position Nabi to go forward and be the leader in addressing Gram-positive infections. With regard to NicVax, that has always been opportunistic. It is an application of the same technology that we’ve used with StaphVax, but I want to remind you that the clinical studies, the outside costs for clinical trials, has been funded to this point by the National Institute on Drug Abuse. And we have said we will go forward with the Phase III study with external funding. So we will not use cash to advance that Phase III clinical trial. We will wait for that outside funding, which we do anticipate from the National Institute on Drug Abuse.

And in terms of self-commercialization, what we believe is that in understanding the value of this Gram-positive infections franchise, the role of a vaccine in bringing value to patients and physicians, in a high-risk patient population, a prevent versus treat modality, how the other applications can be synergistic with it. When we look at markets, we see opportunities that we believe will product extraordinary value when we are able to commercialize. And that we will see those opportunities and execute on those opportunities in an innovative way but a way that will create strong return for our investors. So I think those would be my scattered response to your four scattered points.

Thanks for the liberties.

Your next question comes from Kevin DeGeeter with Dawson James.

How are you doing, Tom?

Good, Kevin. How are you?

I’m hanging in there. Hey, you talked a little bit about your plans here and the work you’re doing to commercialize in Europe. Can you tell me a little bit in terms of what you found on the reimbursement studies? Are we seeing similar infection rates and similar costs in the SRD patient population in Europe per infection to what we’re seeing in the U.S.? I was hoping you can expand a bit more on that.

Overall, in the dialysis population, the incidents of infection rates are the same. Clearly the strains of infection can vary by market, and that has to do with the over use or under use of antibiotics in various regions around Europe. But as we look at the population and we look at the economics and costs of infection, we -- the data is reinforcing what we had believed going in, namely that we could maintain a global pricing strategy for StaphVax and achieve penetration rates that are comparable in Europe and the United States. And that’s been a great encouragement and an affirmation of how we intended to go forward.

Terrific. And one other housekeeping question here. Can you give me a sense, you know, WinRho has come out of the picture here for your sales, guys. They’re going to reallocate their calls. Don’t have as many products in their bag. Have you been able to retain all of your sales people and how do you stand there in terms of, you know, basically, you know, your sales and marketing structure you have in place, keeping them in place here through a transition period.

Well, our sales people are very important assets of Nabi Biopharmaceuticals, and certainly going through a transition like that, we were focused on affirming their value to the organization and making sure that they were incented to remain with the organization. Our retention even with the change of WinRho has been excellent. It hasn’t been 100 percent. But what are the real selling points for a career with Nabi Biopharmaceuticals are StaphVax and the products in the pipeline. And they see PhosLo as a key first step towards getting the selling responsibility for StaphVax and getting the early launch of StaphVax off to a very strong start.

Great. Thanks for all the clarity, Tom.

You’re very welcome.

Your next question comes from Lei Zhong with Natexis Bleichroeder.

How are you doing today?

Hi, this is David Quan for Lei Zhong. How are you?

David. Hello. How are you?

Good. How are you doing?

Good. Thanks.

Most of my questions have been answered. But I do have a question on PhosLo. Could you give us a dollar amount for the tablet inventories at the wholesale level?

No. That’s not something that I have or that I could do. I’m sorry, David.

Okay. And as for the antibody business, do you have any clarity as to the direction of the business going forward? Do you expect it to stabilize?

Well, we would expect as was commented that the revenue levels to that business will essentially be even with the revenue levels we reported last year. But to point, we run that business much more opportunistically. The long term strategic value of that business is to generate the antibodies that are the raw materials today for Nabi-HB, tomorrow for Altastaph. And that’s really our focus for that segment.

Plasma, David, is a really tough business. And there are market forces that as a supplier you can’t control, so what our strategic objective is in the period prior to large scale manufacture of Altastaph is to manage that business for a consistent cash flow, and while production increases or decreases for normal source plasma, we need to comment on those in terms of their impact on the revenue line. They truly have little effect, if any, on the gross margin and the cash line. Where you really need to focus is on the specialty antibodies because that’s where the pricing is more favorable and a cash return can be earned. And the good thing that we commented on today is that some of the decline in normal source plasma production is because we’re prioritizing the production of those specialty plasmas that are a source of cash inflow. It’s a piece of our business that we don’t talk a lot about because it’s strategically not important. It does affect our results, and I just wanted to make sure that I made those clarifying comments while I had the opportunity.

Great. Thank you.

Your next question comes from Vatnark (ph) Bathoe (ph) with Harris Nesbitt.

Hi. Thanks for taking the question.

Absolutley.

I was wondering if you could give us a little bit more clarity on enrollment in the Epic (ph) study and also whether you’ve already initiated the USC (ph) study and what enrollment in that study might look like?

Okay. Henrik -- we don’t usually comment on where we are in the enrollment process, but I’ll leave that to you, Henrik.

Yes. I guess the only thing I can say regarding the enrollment in Care 2 and in Epic is that we are on track to complete the studies on schedule. That is in the second half of this year. And our goal and our target as Tom indicated for Care 2 is to announce some preliminary data on the CM levels of [inaudible] products and lipids in the second half of this year, and announce final results in the second half of next year. The reason for the difference between the preliminary and the final data lies in the need for the EBCTs, the electron-beam computer tomography data which require one year of follow-up. But we are well on track to meet those deadlines. With Epic, we have said that our goal is to submit a license application in the U.S. assuming that the study is positive in the second half of next year, and we are also on track to do that.

And I’d like to comment on the USC study, if I could. When we had planned the USC study last year, it was based on current market share data for Europe. And as we have reviewed the trends in market share and the shift during 2004, which has been a shift from calcium carbonate to Renagel, what is now apparent to us that the important studies in Europe will be the Care and Care 2 studies. And as a result of that shift in market share, we will not proceed with the USC study because the return would not be as significant based on these new trends in market share.

Okay. Excellent. Thank you.

You’re welcome.

Your next question comes from Martin Auster with Wachovia Securities.

Hey, Tom, thanks for taking my question.

Hi, Martin.

Do you plan to update us on infection rate in the StaphVax trial sometime before the data as you did back in December? And then also, is there any sort of interim efficacy analysis planned by you guys? And are there any provisions in the trial for results you reported early if there’s overwhelming efficacy or futility?

It’s no to all of them, but I’ll let Henrik walk you through each one.

Right. Right. So in terms of interim analysis, we decided not to do that, Martin. And the reason we decided not to do that was that the enrollment period was extremely far off. As you remember, we were able to enroll close to 4,000 patients within a ten and a half month period. So it just simply didn’t make any sense to try to introduce an interim analysis. Because all of the patients had already been enrolled at the time when we could do an interim analysis. So there would be no purpose in doing that. And obviously, it also needs to brought in mind (ph), that you are paying a statistical penalty if you do two interim analysis, so there’s no interim assessment of the data. And we won’t break the blind before the last patient has been followed for 12 months and all the data has been entered into our database.

In regards to updating investors on the overall infection rate in the study.

The reason that we did that initially, Martin, was in response to the Altastaph neonate trial where we saw a reduction in infection rates that had not been anticipated. And we wanted to be able to provide that data to give investors assurance that there would be enough events in this study to reach a definitive conclusion about the vaccine. At the time we did that, we also disclosed that we wouldn’t provide another update until the efficacy results.

Right. How often is Nabi updated on the infection rate in the trial?

Well, it is obvious data which -- on a blind basis which some of us have access to on an ongoing basis.

Okay. And let me ask one other question. I guess as we’re, you know, looking forward post data assuming the StaphVax data is positive, what sorts of steps -- are you taking steps now in terms of prepping the market commercially in terms of getting reimbursements set up? And could you just update us on any preliminary conversations you’ve had regarding just what the climate looks like for StaphVax pricing at this point, or is it still way too early to even get a sense of kind of where things might shake out?

We are in the preparation for reimbursement, and clearly our focus is on reimbursement in Europe. As we speak, we are continuing to refine the reimbursement models in the major markets. That means that we are speaking to physicians and healthcare providers in those markets and we are beginning the contacts at a governmental level as well about reimbursement. And as I said before, to date, costs of infection, incidents of infection, data, awareness of the issue and the value in preventing infection, all is very high in Europe and certainly in many cases higher than it is today in the United States. So we look at that as a very favorable environment based on all the work to date. We don’t begin the formal process to negotiate reimbursement until you have approval. So these preliminary meetings and these discussions to affirm that the methodology you’re applying are appropriate in each country are critical, but you won’t get down to the debate on the data until you have the approval. And that will, we hope, happen very late this year, very early next year.

Okay. And it’s going to be your plan not to comment specifically on pricing until the product is ready for launch?

When we’ve looked at other high value pharmaceutical launches in Europe, when companies have speculated about pricing ahead of these negotiations, we believe the outcome has not been favorable. What we believe is the prudent approach is to bring all of the information into the reimburser who has no preconceived notion about what you’re going to ask for and what you’re seeking, and then to have a much more meaningful dialogue about the value that you’re bringing with the product. And clearly, everything that we see indicates to us that that’s the right business approach. And Europe is very important for us to have go well because that sets a price point for the U.S. market and other markets around the world.

All right. Thanks for the comprehensive overview.

Martin, let me just clarify what I said before regarding the infection rate. What some of us are getting on an ongoing basis is a total number of [inaudible] because they’re being sent to us from the hospital on a blinded basis. What we are not doing and what we don’t plan to do is to put that in the -- before the studies are over is to put that in the context of the total number of patients yet being treated. That was -- we did that back in December because that is the only way to which we could actually compare the event rate in the ongoing trial with the event rate in the first Phase III study. And as you remember, the conclusion was that the event rate on a per-patient year basis was identical. We haven’t done that again, and we don’t plan to do that before the study is actually concluded.

That was very important, Henrik. And that just affirms that we do not have information internally that you don’t have externally that would be helpful in understanding what’s going on in that population. We will wait to get that until the data is unblinded.

Henrik, thank you very much for the clarification.

Sure.

Okay. Good night.

Thank you, Martin.

Again, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad.

Actually, Brooke, because I think we’ve hit the 5:30 point. I think we’ll draw the conference call to a close. But certainly we appreciate the participation on today’s call. If there are additional questions, please contact us and we will be happy to walk through that. And we look forward to continuing to update you on our progress as we go through 2005. Thank you very much.

Thank you. This concludes today’s Nabi Biopharmaceuticals first quarter earnings conference call. You may now disconnect.