Vaxart Inc (VXRT) 2005 Q3 法說會逐字稿

Good afternoon. My name is Wes and I will be your conference facilitator today. At this time I would like to welcome everyone to the Nabi 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, Wednesday, October 19th, 2005. Thank you.

I would now like to introduce Ms. Connie Bienfait, Vice President of Investor Relations. Ms. Bienfait, you may begin your conference.

Good afternoon and welcome to the Nabi Biopharmaceuticals conference call and webcast to review our third 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 through 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 addition capital on acceptable terms; the Company's dependence upon third parties to manufacture its products; the Company's ability to fully utilize capacity of its manufacturing facility; the impact on sales of Nabi-HB from patient treatment protocol and the number of liver transplants performed in hepatitis B-positive patients; reliance on a small number of customers; 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 25th, 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, October 19th, 2005. Any redistribution, retransmission, or rebroadcast of this call or the webcast in any form without the express written concept of Nabi Biopharmaceuticals is prohibited. Telephone replay of today's conference call will be available through 5:00 p.m. Eastern time on October 26th, 2005, and 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's website, www.nabi.com, through 5:00 p.m. Eastern time, on October 26th, 2005.

I will now turn the conference call over to Thomas McClain, Chairman, Chief Executive Officer, and President of Nabi Biopharmaceuticals. Tom, please go ahead.

Thank you, Connie, and good afternoon, everyone.

We've made some tremendous progress through the first nine months of 2005. Everything we set out to accomplish this year was closely aligned with our business strategy. Simply stated, that strategy is to leverage our business today to develop and commercialize a portfolio of products to address the challenge of healthcare associated infections. We have had to work through some unexpected challenges, but we have also been able to take advantage of important new opportunities. That is a credit to the business and management focus we have developed inside Nabi Biopharmaceuticals over the last three years.

At that time beginning of 2005 we knew that the funding to advance this objective in a comprehensive way was critical to building additional shareholder value. Our base model of cash flow from operations, funding our investment in the future, was going to be challenged by the costs associated with the pre-marketing and launch activities for StaphVAX. That challenge was compounded by the termination of our distribution agreement for WinRho at the end of the first quarter of this year and the intense competitive challenges PhosLo has faced in 2005.

We are encouraged that during the third quarter, there is solid evidence that our base business model is stabilizing. As Mark Smith will describe in more detail, our net cash investment in the development and launch of StaphVAX totaled $20 million in the third quarter and is more consistent with our fourth quarter 2004 performance before the loss of WinRho With cash and marketable securities of more than $130 million on hand at the end of the quarter, we remain confident that we have the financial resources to bring StaphVAX to market.

Just as important for our investors, we also made significant progress in advancing our business strategy since our last conference call. To review that progress, I would like to put it within the context of successfully launching StaphVAX. That plan is focused in three key areas: First, defining a strong value proposition for the healthcare market. Next, developing innovative sales execution to drive change in the current treatment paradigm. And third, building scalable infrastructure to support expanding patient use.

Turning to the first of these three elements, defining a strong market value proposition. We have focused on three critical drivers to define the value of our approach to healthcare-associated infections. One, a combination of compelling clinical and medical data. Two, a persuasive economic rationale. And three, strong physician and public health awareness.

Certainly, in terms of clinical and medical data, the most significant milestone of 2005 will be the results of our Phase III clinical trial of StaphVAX. We all anxiously await those results. With the 12 months blinded follow-up period just completed in August, the timeline we set to compile and analyze the complete data set and have results by September or October was and is very aggressive. It is much shorter than clinical study analysis and dissemination of results as a rule. With that said, we continue to expect to break the study blind and announce top-line efficacy results in late October or early November. We plan to hold a meeting in New York to review the results. The meeting will be accessible through a teleconference and over the internet. Details will be included in the press release announcing the top-line results.

Today I would also like to confirm that a more complete presentation of the data, including much of the secondary endpoint data, will be made on November 11th, between 10:00 a.m. and 12:00 noon and the American Association of Nephrology meeting, ASN, in Philadelphia. We're also planning for a teleconference and webcast on November 11th to review this additional data with our investors. All of this leaves us on schedule to file our BLA in the U.S. before the end of 2005.

Clearly, preventing Staph aureus infections in dialysis patients is an area of significant unmet medical need. Our strategy is to also advance this prevention approach to address other patient populations and other bacteria causing these infections.

Results from the immunogenicity study with StaphVAX in orthopedic surgery patients affirmed what we saw earlier this year in cardiovascular surgery patients, namely, that we can stimulate antibodies to protective levels in a high percentage of these healthier patients, nearly 95%. This compares very favorably to the 80% of dialysis patients who achieved protective levels in our first Phase III trials. This result further advances our belief that if the vaccine can provide protection in immune compromised ESRD patients, it has the potential for an even greater benefit in healthier patient populations.

In addition, we announced that we made progress advancing the initial clinical trials for our Staph aureus Type 336 vaccine. When combined with the current StaphVAX, we believe we will be able to provide protection against all of the clinically relevant strains causing Staph aureus infections today. Our discussions with the FDA have indicated that we should be able to include Type 336 with StaphVAX based on safety and immunogenicity data. We would then monitor the clinical benefit in terms of preventing Type 336 infections, post-launch.

We also are actively expanding our focus beyond Staph aureus, to the second most prevalent Gram-positive bacteria causing bloodstream infections, Staph epidermitis. We have continued to advance initial clinical studies of an antigen, TS1, that is common to approximately 80% of Staph epidermitis strains. And we recently announced the grant of a patent on a second antigen that we believe could provide coverage for the remainder.

Finally, we have also continued to make progress in responding to European regulatory requests related to our MAA filing for StaphVAX submitted in December of last year.

Beyond compelling clinical and medical data, we know pharmicoeconomic data will be a major driver for pricing and for the expectations for the early up-take of StaphVAX. We have completed models in relevant European markets and several recent publications have underscored the cost of infection.

Finally, public awareness of the challenge of Staph infections continues to increase in Europe and more recently in the U.S. We have sponsored several panels and presented at medical meetings as part of building greater awareness around the medical challenges with these bacteria and the challenges of ever-increasing antibiotic resistance. That effort continues to accelerate and we are adding additional resources to expand the effort in terms of both breadth and depth of coverage.

As just one example, an important presentation at ASN will be on new data demonstrating that the incidence of infection in dialysis patients with fistula, graft, and catheter access supports both the medical and economic rationale for vaccinating all chemo-dialysis patients.

Turning now to our progress in developing an innovative approach to sales execution, we have focused on three important drivers: Specific targeting for three key levels of decision makers; next, a team selling approach to clearly substantiate the value proposition; and finally, a selling message that is focused on clear product differentiation.

Strategically, PhosLo has been important as an opportunity to learn the nephrology market in preparation for the launch of StaphVAX. With time, we've come to appreciate that those learnings can be extended to the European market, where control over the use and reimbursement for pharmaceuticals is highly structured. Based on this experience, our launch and commercialization plans are focused on three levels of influencers that will drive the use of the vaccine.

First, at a national and regional level, government and professional bodies that establish vaccine guidelines, major insurers, and major healthcare providers. Next, at an institutional level, the physician who drives protocols, the pharmacist, and the administrators. And finally, at the patient level, the prescribing physician.

Our market and pricing research is identifying a significant potential for StaphVAX. Clearly there is recognition that a vaccine to prevent these infections is needed and that it will be better for patients. However, there is also strong appreciation at national levels that the benefit is expected to reach far beyond preventing individual infections to more broadly slowing the emergence of resistance to antibiotics and lowering overall rates of infection in the population. Based on this understanding of the broad benefits from vaccinating versus treating patients, our analysis is confirming what we have known all along: that the strength of our pharmacoeconomic data will be of greatest significance in driving recommendations and ultimately driving the use of StaphVAX.

Finally, the third key factor in commercializing StaphVAX is to develop a scalable infrastructure that can expand as demand increases. Here, we are focused on, first, a reliable supply of quality product; second, on systems and processes to support an expanding franchise opportunity based in dialysis centers and hospitals; and third, a commercial model that can be replicated successfully, market to market.

The announcement of positive results from our clinical trials from three commercial scale lots of StaphVAX provided evidence that we have access to a reliable source of vaccine. We believe our contract manufacturer can support the launches in Europe and the United States. Currently, core elements of our supply chain are being implemented in Europe. The model we are developing will support a similar demand to cash process in the U.S. market as well. And in our announcement today, we also disclosed that our initial commercial focus in 2006 targets launches of StaphVAX in the U.K., Germany, and Ireland.

We have added critical leadership and we are making progress to realize our key 2006 commercial goals. Importantly, Joseph Johnson joined Nabi Biopharmaceuticals as our Senior Vice President of People, Process, and Technology. His extensive experience working in the biotechnology industry makes him a very strong addition to our senior leadership team. Joe is already proving instrumental in acquiring the talent that will drive us to the next level of performance.

This quarter, Edwin Klumper, M.D., joined us as Vice President, sales and Marketing, Europe. Dr. Klumper, a 15-year veteran in the pharmaceutical industry has held a number of leadership positions at Amgen.

And Chris Tovey was named Country Manager, U.K. and Ireland. Mr. Tovey, a 20-year veteran of GlaxoSmithKline, has a proven track record in successfully commercializing vaccines, antimicrobials, and other therapeutics throughout Europe.

Finally, the model and learning from our launch in each successive market will be applied to the next. While a global launch within Europe is unusual for a U.S.-based company, we are confident the learning and data we will generate on a small scale will be instrumental in helping us to prepare for a successful launch in the U.S.

In closing, like you, we are anxiously awaiting the results from the Phase III StaphVAX trials. Those results will have a significant impact in defining our future as a company. But as we wait, we are making excellent progress towards the launch of StaphVAX in Europe and the U.S. And we are rapidly advancing the other programs that will establish us as an innovator and as a global leader in healthcare-associated infections.

All of our work supports that our vaccine approach to address this problem is the answer that is needed on a global scale. Our programs are poised to become the standard of care in hospital-associated infections. Our products also have the potential to not only improve patient health and save lives, but to reduce the overall cost of care. And as we expand the applications of our technology, they may one day prove to have been instrumental in eradicating these infections. That is our vision, and that is what inspires us to succeed.

With that update on StaphVAX, I would now like to ask Mark Smith, our Senior Vice President, Finance and CFO to highlight our results for the third quarter. Mark?

Thank you, Tom.

Consistent with solid execution of our core operating strategy during the third quarter of 2005, our operations have gained momentum. Total product sales of $31 million, including biopharmaceutical sales of $20 million that represent an increase of 39% from the second quarter of this year. Consistent with our operations expectations, cash used in operations was $20 million as we concluded the StaphVAX Phase III trial and advanced our prelaunch activities. And we ended the quarter in a strong financial position, having $137 million of cash and short-term investments on hand.

The increase in biopharmaceutical sales was powered by sales of PhosLo totaling 8.1 million, more than reported sales for the first and second quarters of this year combined. Behind reported sales was continued strong patient demand that has maintained despite an intensely competitive environment, including the introduction of a new competitor, preparations for the introduction of Medicare Part D, and competing clinical trial data.

Patient use of PhosLo exceeded shipments to wholesalers, resulting in inventory levels of PhosLo at wholesale as being reduced. This allowed us to reverse $5.2 million of deferred revenue in the second quarter of 2000, when wholesaler inventories were higher.

Also important for PhosLo, the conversion in the U.S. market to the gel cap formulation was virtually completed in the quarter, as tablet inventories at wholesalers were reduced to a couple of weeks. PhosLo sales were $15.1 million for the first nine months of 2005. Sales of PhosLo were reported at 9.2 million in the third quarter of last year, when wholesalers were building inventories in anticipation of patient demand.

Looking ahead, we are planning and executing for the introduction of Medicare Part D, effective January 1 next year. Based on the work completed to date, we anticipate that PhosLo will be on formulary at parity or at preferred status in most PDPs that will serve the Medicare population. In this regard, we believe that PhosLo will provide both a significant clinical benefit and provide patients significant out-of-pocket cost advantages.

Sales of Nabi-HB totaled $10.8 million in the second quarter of 2005 compared to 13.7 million in the comparable 2004 quarter. This decrease is consistent with the decrease in the number of liver transplants for HPV-positive patients in 2005. The decrease has been partially offset by increased use of Nabi-HB among HPV-positive liver transplants patients on maintenance therapy following transplants.

Year to date sales of Nabi-HB totaled $28.5 million and is consistent with reported patient use of the products.

Sales of our other biopharmaceutical products totaled $1.3 million in the third quarter 2005 as compared to $2.1 million in the 2004 third quarter, reflecting lower sales of Aloprim as the result of competition to that product since the second half of 2004, partially offset by increased contract manufacturing revenue.

Total antibody sales were $10.6 million in the third quarter, reflecting stable nonspecific plasma production and lower specialty antibody sales. Consistent with out operating strategy for this segment of our business, we retained anti-HBs plasma for future manufacture of Nabi-HB and allocated plasma production resources to production of anti-Staph aureus plasma, for future manufacture of Altastaph for use in clinical trials.

In line with sales of higher margin biopharmaceutical products, gross margin for the second quarter -- for the third quarter of 2005 was $16 million. Based on the increasing biopharmaceutical sales, as well as continued use of our manufacturing plant in Boca Raton, our gross margin as a percentage of sales returned to 52%.

Plant capacity charges were limited to $300,000 in the current quarter. Gross margin dollars in the 2004 quarter were $23 million, including the benefit of sales from WinRho that we no longer distribute.

Research and development expenses were $17.4 million in the quarter as we completed the Phase III clinical trial during the third quarter, worked to establish commercial scale vaccine manufacturing, advanced our next generation Gram-positive programs and supported PhosLo clinical programs. R&D expense was $18.6 million in the third quarter last year, when we completed enrollment in the StaphVAX Phase III trial. Selling, general, and administrative expenses increased to $19.6 million, due to costs related to commercialization activities for StaphVAX, including ongoing market and pricing research, establishing commercial operations in Europe, and prelaunch initiatives in the U.S.

Other operating expenses were $2.3 million for the quarter and were comparable to the 2004 third quarter total, comprising amortization of intangible assets associated with the acquisition of PhosLo.

For the quarter we reported an income tax benefit of $7.4 million at an effective rate of approximately 23%. Our tax benefit reflects the planning activities we will undertake in 2005.

As a result of our ongoing commitment to product development and our accelerating investment in prelaunch activities for StaphVAX, we reported a loss of $16.1 million or $0.27 per share for the quarter and 52 million -- $52.9 million or $0.89 per share for the first nine months of 2005.

After making the investments required to advance our Gram-positive infections program and prepare for the launch of StaphVAX, we ended the quarter with cash and short-term investments of $137 million. The use of cash from our balance sheet this quarter is consistent with our stated expectations for 2005 and included restricted cash as a deposit for our Gaithersburg R&D facility and continuing to build prelaunch StaphVAX inventory for a total of $5 million.

Moving to our outlook: Full-year revenue guidance for total sales is now projected at 120 to $125 million, including total biopharmaceutical sales of between 75 and $79 million. Within biopharmaceutical sales we now project full-year PhosLo sales of 26 to $28 million. This new projection reflects the reduction in inventory levels of PhosLo at wholesalers reported this quarter, partially offset by the impact of the price increase for the product. The benefit of the price increase taken effective July 1 will largely commence in the fourth quarter as a result of wholesaler inventories being reduced this third quarter. However, it will not be fully realized until July 1 of next year.

Our previously announced guidance for Nab-HB remains that revenues are expected to be at least equal to 2004 levels of $40 million. Funding the advances of our clinical programs, research and development expenses, are expected to increase by up to 20%, consistent with our previous guidance for R&D expenses. We now anticipate that SG&A expenses will increase approximately 20% from 2004 levels of $55 million. The increase relates to accelerating preparations for the launch of StaphVAX in Europe and the U.S., as well as increased sales and marketing.

We still anticipate that our effective tax rate for the full year will be approximately 25 to 35% 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.

I would now like to turn the call back to Tom McClain.

Mark, thank you very much for that update. Wes, what we would like to do now is open things for Q and A. Thank you.

Thank you, Mr. McClain. [OPERATOR INSTRUCTIONS] Your first question comes from Lei Zhong from Banc of America.

Sorry about the noise. Tom, just a question on the primary end point. Can you be specific, is it 50% reduction in Strains 5 and A at 40 weeks?

That's for the question, Lei. What I should have said, joining Mark and me for the question-and-answer session are Raafat Fahim, our Senior Vice President of Research, Technical, and Production Operations, and Henrik Rasmussen, our Senior Vice President of Clinical, Medical, and Regulatory Affairs, and absolutely I will roll that question over to Henrik.

Thanks, Tom. Basically, in the ongoing trial the primary endpoint is the event rate of Staph aureus bacteremia type 5 and type 8, at eight months. So in terms of the primary endpoint, it doesn't state what level of reduction you need to see. What it does state is that it needs to be statistically significant. That is, with a P value of less than 0.05.

To take that one step further though, the study is powered to pick up with 90% power and reduction in event rate of 50% or more. If we go beyond that and if we see a smaller effect, let's say you see an effective rate of 41 or 42%. We still have 80% power to pick it up. But the stated primary end point is the event rate at 8 months, type 5, type 8, Staph aureus bacteremia.

So, basically what it means is, you not -- even if you miss the intent to treat, which includes the 336 strains, as long as you reach 50% reduction, StaphVAC is licensable. Is that understanding correct?

Yes. What we have discussed with the FDA is that a 50% efficacy rate is clinically meaningful, and if we are hitting it with a P value of less than 0.05, should be licensable, yes.

I want to make the point, though, that it is also possible we could still get a -- get in a situation where we might find a smaller effect, say, 40 or 45%, and that could still be statistically significant with a P value of 0.05. Of course, the study actually has substantial power to pick up those differences as well. Is the 40% efficacy rate clinically meaningful and would that be acceptable to the -- for the FDA for licensure, we don't know, but we certainly would discuss that with the FDA if that were to happen.

Thank you for that. Just to follow up, do you know the total events -- total episodes of infection by month 8, even though it's blinded?

The answer is yes, but obviously we haven't disclosed it. What we did do was we looked -- we provided a blinded update back in December for the investment community, and we haven't provided any further update since that. But at this point in time, obviously we are getting close to the final analysis.

Are you seeing a constant 20%-ish 336 as the total infection?

I can't comment on that. What I can say is that when we issued the press release back in December we had 82% type 5 and type 8. The rest, 18%, was type 336, and that was very consistent with what we found in the first phase III study. We can't comment beyond that.

Okay.

We have no more data beyond that to be able to comment.

Thank you for your clarification.

Your next question comes from Jim [Birkenauer]of Lehman Brothers.

Hi, guys. A few questions. Just on the StaphVAX Phase III, it would seem that one of the potential risks is just reproducibility of antibody titers from the first trial. It seemed pretty apparent when you had levels above 100 micrograms per mil, you didn't get much staph infection in the StaphVAX arm. I'm just wondering if you can comment on what gives you confidence in reproducibility of those antibody titers. In particular, do you have any information on causative intervals around the titers that were measured in the first study?

Jim, the one thing we can comment on, and Henrik can report, is that we did an immunogenicity study with a vaccine that's being used to dose in this Phase III trial before initiating the study, because we wouldn't have gone forward with a vaccine that was less immunogenic. And Henrik, do you want to comment on the results of that?

[Inaudible] You're absolutely right, we wanted to make sure, Jim, because your point is an excellent one. So we wanted to make sure that the lot we were using in the ongoing trial was at least as immunogenic as the lot we used in our first Phase III study. And because of that we tested that in healthy volunteers back two years ago before we actually started the phase III study. And, as Tom is indicating, the lot was exactly as immunogenic. So, from that point of view, we are very confident that we should be able to induce at least [inaudible] body levels in the current study.

And then just following up on the prior question, in terms of assessing what might be the minimal level of efficacy that's acceptable to the FDA, are there any precedents for vaccines approved with less than 50% protection? My thought was Prevnar might have had something around 40% for for otitis media, but do you have some precedents that give you comfort below 50%?

Jim, I'm going ask Raafat Fahim to comment on that for us.

Hi, Jim. Yes, there are actually precedents for vaccines that are currently [inaudible] licensed and with efficacy of less than 50%. For example, a TB vaccine is licensed with less than 50%. But obviously the FDA will be looking for efficacy that would be clinically significant, and as Henrik indicated, he indicated that 50% would be clinically significant.

And then just the final question, and I'll jump back in the queue. In terms of PhosLo, can you comment on what the distribution of PhosLo, Tums, and Renagel is in the Medicare population right now and how you expect that to shift with Medicare reimbursements, perhaps, for all three?

We know overall. I can't comment on Medicare alone. Overall market share we believe appears to be fairly consistent with what we have seen since we acquired the product that anywhere between 20 and 30% of patients at a given time would be on Tums and that the patient distribution beyond that would be essentially split evenly between Renagel and PhosLo. Fosrenol has been up, it's been down, it to date is not proving to be as significant a factor as calcium carbonate usage in those patients.

Thanks for taking the questions. And good luck with the StaphVAX trial.

Thank you very much, Jim.

Your next question comes from Tom Shrader of Harris Nesbitt.

Hello, Tom.

Hi. It's all kind of dwarfed by the one big question.

There you go.

Just to make clear, you'll press release the night before, and then the next day you'll have a conference in New York? Is that what you are saying?

We will press release definitely the night before the morning of the meeting and we will have the meeting.

So we can just watch to see when you go to New York?

That's right, check my travel plans.

I had one question, as long as you have Raafat there. The 336 approach, are you finding that's very analogous to 5 and 8? You need the same levels of antibodies in animals? They do the same thing, they kill the same way? Is that straightforward or is that kind of of a new ball game.

Well, we certainly for the 336, we'll take the same tracks that we took for 5 and 8, which is protection in animals, because, as we said, the 336, the incidence is not enough to give you efficacy. We talked to the FDA about that and they are convinced that we just go by [inaudible]. So, our model is just an animal model of protection and when we get protection this is the level we're going to use.

And you need about -- so you don't know if you need more antibodies or less yet?

Not in humans. In animals we know, but in humans --

Is it very similar? Does it look straightforward or could it be one vaccine needs to be given on a different schedule than the other or --

Oh, you're talking about the schedule, no, we're seeing the same thing that we saw in terms of immune responses as high as with one injection that gives protection in animals. So we don't need the different schedule. Whether we need the same level of antibodies, we'll find that out from animal models, not from humans.

Okay, very good. Good luck.

Thank you, Tom.

Your next question comes from Joe Slavinsky of Thomas Weisel Partners.

Hi, Joe.

Hi, guys. Just had a question on StaphVAX pricing. I know you can't comment specifically on it, but in the orthopedics community, initially studied press release, it mentioned that treatment costs associated with the Staph aureus bacteremia were $56,000. I know that's a little bit higher than we've seen in the past, $44,000 per infection. Is that simply a matter of a different patient population, ESRD versus orthopedic surgery?

To explain what happened there, the Duke University study was an historical look-back, so the dollars that were reported before were in 1992 dollars. The 56 was not reanalyzing, it was simply taking the costs in the Duke study and projecting them forward to 2005 costs.

I got it. Okay. And then one other question on Altastaph. When you announced the results at IDSA for that presentation, you mentioned the next trial will be a proof of concept as opposed to a pivotal Phase III. Can you give any color around that as far as why the decision was made?

Sure. Henrik, do you want to comment on that?

I can do that. We've had some additional discussions with the FDA as well as with a number of external investigators. And we felt that the prudent approach would be to design a proof of concept, those range in Phase II studies, to optimize the dose we are going to take into phase III.

Thank you.

Thank you, Joe.

Your next comes from Jon Stephenson of Summer Street Research.

Great. Thanks for taking the question. I just wanted to confirm that the assumed isolate capture rate in the Phase III trial is 75% and just get a little bit of color as to what the Company has been doing in this trial to potentially increase that capture rate up above that. I know that in the last trial it was something like 78, 79%.

So this is a question of how many infection isolates are we able to type as Staph aureus 5, 8, or 336.

Right.

Okay. Henrik?

Yes, what we [inaudible] what we actually found in the first study was that we had a capture rate of approximately 70%. So that was a capture rate in the first phase III study. And statistically we are planning for a similar capture rate in the ongoing trial. Obviously we are increasing our monitoring as compared to the first trial, and we certainly hope that we'll be able to increase the capture rate, but you don't know that yet.

Okay, great. And then just to follow up, what's the impact --

Can I just interject, just so everyone on the call understands what we're talking about: we have infections, we type them, if we can prove from the typing that they're 5, 8 and 336, they're counted accordingly. If there are untyped infections, as there were in the first Phase III study, they are recognized as 5 and 8 infections in the statistical calculation. I'm sorry to have cut you off.

No problem. Just switching gears, was also curious, what impact do you anticipate in Medicare Part D having on the market share for the phosphate binders?

Could you repeat that again?

Just curious what impact you expected the onset of Medicare Part D next year having on the market share for the phosphate binder market.

What we believe today is that 20 to 30% of patients overall are still being treated with calcium carbonates, and that is a question of economics. And we expect that some of those patients now having access to Medicare Part D will be able to be treated with prescription binders like PhosLo, and, in fact, that if calcium has worked within those patients, the superior bindings, the other benefits of PhosLo versus calcium carbonate should be persuasive for both the physician and the patient.

Great. Thanks.

You're welcome.

Your next question comes from Chris Tanaka of Lundberg Capital Management.

Good afternoon. Thanks for taking my call. Was wondering if you could outline sort of the next steps in the E.U. regulatory review of your application and then specifically highlight what mechanism, if any, there is for supplementing that by application with the ongoing phase III data.

What I'm going to do is just comment from the EMEA website because all of this is provided on their website. They do an excellent job about overviewing the approval process.

Our license application was submitted in December of 2004, we reported that the application had been accepted in January 2005. What that means then is the reviewer is then on a schedule in which they have to issue written comments on the application within a four-month period. Upon receiving the letter, a company is obligated to review those questions and assess whether it will be possible to fully respond within a six-month time frame. If the company determines that it is not able to do that, the company is essentially -- almost always withdraws the application. They're required to withdraw the application.

If the company can respond it has up to six months for that response. When the full response is submitted, the time line for reviewing the responses and considering the application is a 30-day window. At that point in time, the company can receive a letter that the application is approvable or additional questions. If it receives a letter that's approvable, that is based on the next convened meeting of Europe, the regulators, and then the company negotiates the labeling for the product after it gets through the CHMP, and that process of negotiating the label can take up to an additional two months on average, and that would be when you would get the final documents in your hands.

Okay. So where are you guys right now in that process?

We don't comment on any of our status with regard to the regulatory process. That just tells you what the framework for the process is, though.

All right. In the press release you noted that you guys are making progress. I was just wondering what that meant.

Well, obviously if we had received questions, then we would be compiling the answers to the questions, and along the way you also have access to the regulators to seek their input and to advise them of the progress you're making.

Okay. And then on another issue, in the past you guys have said that if we just look at the first Phase III trial and confine ourselves to the incidence of the type 5 and 8 infections, that the reduction you saw was significantly greater than the 50%, I think it was in the range of 80%, reduction. I was just wondering if you could explain the math of how you figured that out, given that there was approximately a third of the data missing, based on not typing the samples.

Well, those would be counted as 5 and 8 infections. All there was was a simple math calculation that if you saw a 63% reduction in 5 and 8 infections at a point in time, and that if you put that same reduction over the percent of isolates that would be expected to be 5 and 8, that obviously it would be a more significant reduction in 5 and 8 infections only, and that is what we're measuring in this second phase III study.

Thank you.

Yes.

Your next question comes from Jason Aurier of Gellah Equities .

Hello, Jason.

Good afternoon. Quick question. What you had said earlier in the call about the type 336 eventual inclusion in StaphVAX, can you just give us a little bit -- I believe that's new information. And can you give us perhaps a time line, maybe Raafat could, on when you could expect to include 336, assuming the safety and immunogenicity studies went well, when you could expect commercial inclusion.

If I could just highlight what the progression would be, and as you are aware, we are in an initial safety immunogenicity study with the type 336 vaccine. If, when we see those results, we're comfortable with the outcome, the next step would be to initiate a much larger safety and immunogenicity study with the vaccine, and if that is of sufficient size and everything again comes out where we would project it should in terms of safety and antibody levels, it would be at that point that we would go back to the FDA to understand what we could do to file for including that with the 5 and 8 vaccine.

And just one additional comment to that, and that is the next trial would obviously be with 336 plus the 5 and 8 vaccines as well, to see that there is no interference between the various antigens, and as Tom mentioned, would be a larger study.

Can you guys give us some guidance on when you expect the first, the current trial, to complete and when -- how long it would take to enroll and complete the second larger trial?

We had said as a goal that we would have the results from the first trial before the end of this year, and obviously the 336 is important for us to add into the vaccine. With a good result we would be looking to move forward rapidly on its development in 2006.

Thank you.

You're welcome.

Your next question comes from David Miller of Biotech Stock Research.

Thanks for taking my question.

Sure.

The statistical analysis plan that you are operating under for the analysis of the phase III trial, does it specify kind of step-wise analyses of the data so, you know, we'll do this analysis, and if that doesn't come back positive then we do this analysis, and so on?

Henrik, do you want to comment on that?

Sure. What we are using for the primary endpoint is what is called a proton regression analysis. It's taken to take into consideration not only the total number of events in the two groups but also the time for those events, so that basically optimizes the chances of success, and that was another analysis which we agreed upon with the FDA.

We do, as you'll expect, have a very comprehensive statistical analysis plan, but not necessarily step-wise. In the statistical analysis plan we have laid out exactly what kind of statistical analysis are going to be applied to what parameters.

In contrast to the first phase III study, we do have a large number of predefined secondary end points, including not only type 5 and type 8 infections, but all Staph aureus infections at a number of different time points. All Staph aureus bacteremia, correlation to titer levels, etcetera, etcetera. So it's very comprehensive statistical plan. For each of those parameters we have predefined, we have laid out the most appropriate statistical analysis.

Are you looking to have all the primary and secondary analyses done prior to -- and reported to you prior to you making the release of the data, or are you just looking for the top line?

What we have said is that [inaudible] will just do the top-line analysis, and then -- it's a very comprehensive, obviously, data set, with a very substantial amount of analysis needed to be performed. We won't have them all. When we release the top line results, we certainly will have them all, at the time when we are submitting the BLA.

So the top-line data will be communicated at the end of October, early November, on November 11th at ASN, we will come back with a more comprehensive set of data involving secondary end points. We will also reserve additional secondary endpoint data for presentations at future medical meetings in the United States and Europe as well. And in that way, determining what end points are meaningful for what physician audiences will be in attendance, it will allow us to continue to make people aware of the importance of the results from the trial.

Okay. I guess I'm trying to get a sense of is that any time a time line is slipped for data analysis, you know, all of us out here on the other end of the phone get a little nervous, and in particular when it's a situation where the analysis is basically by a hard time end point, you know, efficacy at eight months instead of a trigger. So I guess what I'm trying to understand is, is there something in the analysis that bears on the fact that we're being -- that the data is being delayed to end of October, first part of November? Or are --

Actually, this isn't a delay. We've communicated for well over a year that the data would be announced around the end of the third quarter, meaning September or October.

Okay.

What became clear at the end of September was that some investors had heard the words "around the end of the third quarter" and had interpreted that to be September 30th. What we endeavor to do by adding it into the release that went out on the 28th was to give greater specificity to be helpful to investors to understand in that range of September to October, that it would be in more the late October time frame when the data would be available. So you shouldn't interpret anything by the greater specificity that we have given to it. All along the timing has been driven by a single objective, and that is timely to file the BLA in the U.S. before the end of the year, and we are still on track to do that.

Fair enough. Thanks for taking my question.

You're welcome.

Your next question comes from Gabe Hoffman of Accipiter.

Good afternoon. Thank you for taking the question.

Sure.

If I heard correctly, you had mentioned earlier that the majority of the secondary end points would be presented at scientific conferences and was wondering if you could specifically address the 12-month endpoint, you know, after the booster, if that would be in the initial press release or if that would be at a later medical meeting.

We have not -- we have obviously stated that we will disclose the primary endpoint of the trial when we announce the top line results, and obviously other data that is available that may be helpful without compromising the presentation at ASN, we will strive to provide supplemental details as well. We've just not been more committed than that. Obviously because that's the [inaudible] the primary endpoint will be the determine and see the licensability of StaphVAX.

Okay. Thank you. The only thing that I might suggest is that given the importance -- many investors view that endpoint as the most important of all of the secondary endpoints. So I would encourage you to consider that in perhaps disclosing it at the time of the initial press release. Thanks very much.

We appreciate the input. Thank you, Gabe.

At this time there seem to be no more questions.

That's excellent. Well, what we would like to do is thank everyone for their interest in Nabi. We certainly await anxiously the opportunity to review the phase III study results with you and look forward to that in the very near term. Thank you very much.

Ladies and gentlemen, we thank you for your time. You may now disconnect.