Vaxart Inc (VXRT) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2006 Nabi Biopharmaceuticals financial results conference call. My name is Shanique, and I will be your coordinator for today. At this time, all participants are in listen-only mode.

We will be facilitating a question and answer session towards the end of this conference. If at any time during the call you require assistance, please press star, followed by zero, and an operator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr. Tom Rathjen, Vice President of Investor Relations. Please proceed.

Thank you, and good afternoon. Welcome to Nabi Biopharmaceuticals' second quarter conference call. Before we begin, I need to remind you that the information presented here speaks as of today and contains forward-looking statements, which are statements that refer to expectations, projections, beliefs or other characterizations of future events or circumstances. Actual results may differ materially from those in the forward-looking statements as a result of any number of factors, which are discussed at length in the company's annual report on Form 10-K for the fiscal year ended December 31st, 2005, and quarterly report on Form 10-Q for the quarter ended July 1st, 2006, filed with the Securities and Exchange Commission.

And now I would like to turn the call over to our Chairman, Chief Executive Officer and President, Tom McLain. Tom?

Tom, thank you very much, and welcome, everyone, to our second quarter conference call. Joining me this afternoon is our new Chief Financial Officer, Jordan Siegel, who will be providing a review of our second quarter financial results.

As we have articulated throughout this year, the strategic direction of our company is focused on three primary goals - building incremental value through partnerships and alliances, optimizing value from operations and developing proof-of-concept evidence for our key pipeline programs.

Since the end of the first quarter, we have achieved a number of important accomplishments aligned with and supporting each of these goals. I would like to begin by highlighting three significant alliances and partnerships. Each of these provides our company with important strategic and financial benefits today and in the coming years.

In April, we announced an agreement with Fresenius Biotech that provides us with the exclusive North American commercialization rights to ATG-Fresenius S. ATG-S is a phase III immunosuppressive polyclonal antibody product used for the prevention and treatment of acute rejection following organ transplantation. Currently marketed in over 60 countries outside the U.S., the product has been shown to significantly reduce transplant failure and substantially improve patient survival.

This is an exciting opportunity for us to leverage our proven strengths in marketing specialized antibody products. This opportunity also advances our strategy to become a leading provider of products that improve both the longevity and the quality of life for transplant patients.

We assumed responsibility for an ongoing phase III trial in lung transplant patients in the second quarter, and patient enrollment has resumed. Data from the phase III trial is expected in the second half of 2008, and we expect to file our biologics license for ATG-Fresenius S in the first half of 2009.

Also in April, we announced a supply and contract manufacturing agreement with Sanofi Pasteur whereby Nabi Biopharmaceuticals will fractionate human plasma used in the production of Imogam Rabies HT, a product which provides passive protection to individuals exposed to the rabies virus.

This agreement affords us a great opportunity to leverage our manufacturing expertise while also improving the cash return from our specialized operating assets. This agreement also allows us to achieve our stated goal of leveraging our current manufacturing capacity. We are very excited to be moving forward in our relationship with Sanofi Pasteur, one of the most highly regarded companies in our industry.

And our third partnership, announced last month, is with Kedrion SpA, a global biopharmaceutical company based in Italy. Our two companies will co-develop Civacir for licensure in the U.S. and Europe. Kedrion will commercialize Civacir in Europe. Not only was this agreement a major funding event for the company, we believe it was also a validation of the clinical and commercial potential of the Civacir program.

Kedrion's expertise and leadership role in plasma-derived products in Europe should allow us to speed the clinical and commercial advancement of Civacir in the EU. At the same time, it will allow us to provide a desperately needed treatment option for HCV-positive liver transplant recipients and patients who receive an HCV-positive liver in both the United States and in Europe.

We are currently working with Kedrion on the design and implementation of the phase II clinical trial for Civacir and we expect to initiate this trial in the second half of this year. Moving now to another important goal, optimizing value from our current operations.

We are excited about the recent positive opinion we received from the FDA's blood products advisory committee on our BLA for Nabi-HB Intravenous. If the FDA follows this recommendation and approves Nabi-HB Intravenous, it will be the only product in the U.S. indicated for the protection of the transplanted liver from reinfection with hepatitis B virus.

Without Nabi-HB, these patients will suffer from a recurrence of infection following transplant that will destroy the function of their new liver. We are very pleased to be able to advance a product that has a demonstrated ability to provide protection to these at-risk patients. Also competitively this could become a very important development.

Nabi-HB Intravenous targets a small patient population. There are approximately 200 to 250 hepatitis B liver transplants each year in the United States. As a result, the FDA has granted Nabi-HB Intravenous orphan drug status. This means in recognition of our investment in advancing the development of an effective and safe product for this limited indication, we will have a period of seven years of market exclusivity.

Important, also from a competitive perspective, our data substantiated the benefit of our product in preventing the recurrence of hepatitis B over a two-year follow-up period. The length of the follow-up period presents a significant hurdle for other polyclonal and monoclonal therapies, as evidenced by the recent announcement from Cubist about discontinuing the clinical development of their hepatitis B monoclonal antibody program.

As we look ahead to 2007, we believe licensure of Nabi-HB Intravenous in the United States would provide an increased revenue opportunity for this product in three ways. First, in terms of standardizing dosing, particularly increasing usage of the product for long-term prevention of reinfection.

Second, in terms of reimbursement. Today, because its use is off label, some insurance carriers stop covering the cost of Nabi-HB after 12 months. And, third, with a labeled indication, we will be able to distribute clinical data supporting the success of liver transplants in patients dosed with Nabi-HB Intravenous. In turn, we believe this will allow eligible patients a greater opportunity to benefit from lifesaving liver transplant.

When we have a better understanding about how the FDA will respond to the panel's recommendation, we will update our guidance on future revenue expectations for this product in the U.S.

We've also continued to make progress toward the licensure of the comparable product, HEBIG, for its use in HBV-positive liver transplant patients in Europe. We have made some modifications to the formulation of HEBIG to comply with EU standards and that product is now on stability.

With 12 months of stability data, we will re-file in the reference member state in 2007. The reference member state is committed to an accelerated review when the filing with this new data is resubmitted. We continue to pursue a partner for commercializing the product in the EU, but do not anticipate an announcement until we are closer to the product's approval.

My remarks to this point are intended to demonstrate that the combination of the BPAC decision and our agreements with Kedrion and Fresenius made the second quarter a momentous one for our transplant product franchise.

We have made a strategic decision to invest time and resources in the development of this franchise, and we view these milestone achievements as a validation of both the medical need and the commercial opportunity. These developments also support the underlying value creation potential of the transplant franchise overall.

We are particularly excited by the opportunity to establish a worldwide hepatitis franchise through the advancement of Nabi-HB Intravenous and Civacir as we leverage the clear synergies between these two products in terms of clinical development, manufacturing and commercialization.

As we approach the initiation of the Civacir phase II clinical study, we are witnessing increased interest among physicians for new therapies for preventing HCV reinfection without the side effects and the toxicity of current treatments, including peginterferon and ribavirin.

The combination of Civacir's strong safety and efficacy profile and the positive outcomes physicians have experienced with Nabi-HB in transplant patients gives us confidence that we are strongly and uniquely positioned to capitalize from providing effective products for the treatment of transplant patients.

Building on the topic of optimizing value from operations, we are also pleased to report that prescriptions for PhosLo reached an all-time high in May, reflecting both the product's efficacy and physician preference in treating hyperphosphatemia in patients with end-stage renal disease. PhosLo revenues for the second quarter were close to $10 million, up from both last quarter and the second quarter of 2005. We are also encouraged that PhosLo has been recommended for approval by the reference member state in Europe. One item, though, remains, inspection of the manufacturing facility.

Based on earlier discussions with regulators, we had expected this inspection during the second quarter. We were disappointed that this could not take place based on time and resource limitations. The bottom line is that as a company we're unable to influence the schedule for this inspection, and despite the good intentions of EU regulators, that inspection cannot happen until the fall.

Although the approval process has been slower than we would have liked, I want to emphasize that no significant concerns have been raised during the product's review. We remain confident that we can obtain an approval for this product following the plant inspection by EU regulators. It is important to note that as a result of our regulatory strategy, approval for PhosLo is now expected to occur in six important markets simultaneously, and our discussions with potential European partners are also continuing.

We also expect to achieve several other important milestones for PhosLo in 2006, including announcing the results of the CARE-2 study and the EPICK study, as well as the expected filing for the use of PhosLo in the use of stage four chronic kidney disease patients in both the U.S. and in Europe. This filing will be based on results from the EPICK study.

Turning now to our third strategic goal. In the second quarter, we also continued to achieve positive momentum with respect to establishing proof-of-concept clinical evidence for our key pipeline programs. In May, we announced the initiation of a phase IIb study for NicVAX, our product candidate for the treatment of nicotine addiction and the prevention of smoking relapse.

This study is following the expected design of phase III efficacy trials for NicVAX and is intended to demonstrate the benefits of an optimized vaccine formulation in terms of efficacy, antibody levels and safety. Additional elements incorporated in the design of this trial, including behavioral modifications and counseling, should help us to mirror the quit rate we would expect to see from phase III efficacy studies.

The phase II efficacy study will also be measuring the benefit of long-lasting antibodies for the prevention of the high rate of relapse experienced by smokers within the first year of trying to quit. We believe that the potential of NicVAX to prevent smoking relapse over the long term is a major point of distinction from currently marketed smoking cessation products. Enrollment for the study is well underway, and we expect to have trial results available mid-2007.

We were also encouraged by the approval of Pfizer's product, Chantix, for smoking cessation. Its efficacy is based on chemicals blocking nicotine receptors in the brain. When nicotine enters the brain, it cannot bind to those receptors, therefore presenting the pleasurable response from smoking.

As you will also recall, NicVAX relies on a similar mechanism of action. Antibodies in the blood bind up nicotine, presenting it from crossing the blood-brain barrier and therefore preventing its binding to those nicotine receptors in the brain. But we see two clear advantages to our approach.

First, we are leveraging the body's natural defense mechanism and we are not introducing anything into the brain. Second, once you have high levels of antibodies, they will last for at least several months. Even if a smoker is tempted to resume their habit, they won't get the benefit from smoking. By contrast, with pills, patches, or gums, smokers who want to resume their habit can simply stop their therapy.

Today, I also wanted to provide some context around the significant medical challenge NicVAX will address. Smoking is clearly a global healthcare problem, and it is one with serious human and economic costs. The World Health Organization estimates there are 1.3 billion smokers worldwide, and nearly 5 million tobacco-related deaths each year. If current smoking patterns continue, smoking will cause some 10 million deaths each year by 2020.

Half of the people who smoke today, that's 650 million people, will eventually be killed by complications from tobacco use. And costs to the healthcare system are enormous. During a five-year period, 1997 to 2001, the annual health-related economic cost due to smoking exceeded $167 billion in the United States. That means that the total cost over that period approached $1 trillion.

Stepping back, if we do not develop effective approaches to treat and prevent this addition, 1 billion people will die from smoking complications during the 21st century. Clearly, an effective smoking vaccine can have a significant impact in reversing that trend, in improving lives and in saving costs to the healthcare system.

During 2006 and 2007, we will continue to pursue outside funding for the phase III clinical trials of NicVAX, which could begin in the second half of next year, either through a vehicle like the support we received from the National Institute of Drug Abuse currently or a commercial partnership. As we discussed at the beginning of this year, we have purposefully timed the initiation of other proof-of-concept studies sequentially. This allows us to continue to evaluate our financial position and our ability to invest before making contractual commitments for these clinical trials.

Clearly, the Civacir partnership with Kedrion assures that we can follow our plan to initiate a phase II trial later this year. We also intend to pursue a partnership for the phase III studies of the new multivalent formulation of StaphVAX. We will also pursue outside funding or a partnership before beginning the next proof-of-concept with multivalent Altastaph.

In concluding my remarks on the 2006 second quarter, we are pleased that substantial progress is being made in achieving success on each of our strategic goals. We are aggressively pursuing the important milestones we have established for the company this year and beyond, and we look forward to sharing our progress with you in the coming months.

Now, I would like to hand the call over to Jordan Siegel for a review of our financial results this quarter.

Jordan?

Thank you, Tom. The total revenues for the second quarter of 2006 were $29.9 million, an increase of 16% when compared to total revenues of $25.9 million for the second quarter of 2005. The increase in total revenues was primarily driven by improved pricing and strong patient demand for PhosLo and increased specialty antibody sales.

The net loss for the second quarter was $14.8 million, or $0.24 per share, versus a net loss of $20.9 million, or $0.35 per share, during 2005. Results for the second quarter of 2005 included a tax benefit of $7.4 million, which reduced the reported loss. No tax benefit was recorded in the second quarter of 2006.

On a more comparable basis, on a pretax basis, the loss in the second quarter of 2006 was $14.8 million, a 48% improvement over the $28.3 million loss reported for the 2005 period due to the higher revenues, margins and reduced research and development spending.

For the six months ending July 1st, 2006, total sales were $57.5 million, 11% higher than the $52 million reported last year. The 2005 period included $6.2 million of revenues for a product we no longer sell. The net loss for the first half of 2006 was $32 million, or $0.52 per share, versus a net loss of $36.8 million, or $0.62 per share during the 2005 period.

Results for the first half of 2005 included a tax benefit of $14.1 million, which reduced the reported loss. No tax benefit was recorded during the first half of 2006. On a more comparable, pretax, basis, the loss for the first half of 2006 was $32.9 million, a 35% improvement over the $50.8 million loss for the 2005 period.

Cash and cash flow are important factors in assessing our ability to fund our strategy as the company moves forward. We ended the second quarter of 2006 with cash, cash equivalents and marketable securities totaling $70.2 million. It is important to note that during the second quarter, our cash use and operations was $11.5 million, a 48% decrease compared to the first quarter and consistent with our expectations.

PhosLo sales for the second quarter were $9.6 million, compared to $3.2 million for the second quarter of 2005. During the second quarter of 2005, we elected to defer $5.2 million of PhosLo sales based on customer inventory levels.

On a sequential basis, PhosLo sales increased 19% when compared to the first quarter of this year. Sales of PhosLo were driven by continued increases of prescriptions and price increases initiated in July 2005.

Sales of Nabi-HB were $7.2 million for the second quarter of 2006, compared to $10.9 million for the second quarter of 2005. Revenues decreased from the prior year due to the negotiation of a supply agreement with a significant wholesale customer. As a result, we shipped a minimal amount of Nabi-HB to that customer and inventory levels at wholesalers decreased by approximately two months during the quarter.

Revenues of other biopharmaceutical products, which comprise Aloprim and manufactured intermediate products were $1 million, compared to $400,000 in the second quarter of 2005. Sales of antibody products were $12.2 million in the second quarter, 7% higher than the $11.4 million reported in the second quarter of 2005.

This increase reflects increased production and higher sales of specialty antibodies, primarily anti-D and anti-rabies antibodies. The gross margin for the second quarter of 2006 was $14.4 million, compared to $10 million in the second quarter of 2005, an increase of 44%. As a percentage of total revenues, the gross margin for the second quarter was 48%, compared to 39% in the second quarter of 2005. Again, the increase of gross margin was primarily driven by the increase of PhosLo and specialty antibody revenues.

Research and development expenses were $10.7 million for the second quarter of 2006, a 42% decrease from the second quarter of 2005. During the second quarter of 2005, a large portion of our research and development expenses related to StaphVAX - the expenses for the second quarter of 2006 reflected activities related to our NicVAX phase II proof-of-concept clinical trial, ATG-Fresenius S, and continuation of the EPICK and CARE-2 trials to support PhosLo.

Selling, general and administrative expenses were $16.5 million for the second quarter of 2006, compared to $17.2 million in the second quarter of 2005. Selling, general and administrative expenses during 2005 included activities related to the planned European launch of StaphVAX. Reduced spending during 2006 was partially offset by retention and equity-based compensation program expenses and the ongoing costs for compliance efforts related to our federal drug pricing programs.

As we look forward to the remainder of the year, we expect total revenues for 2006 to be in line with previously issued guidance. We anticipate our gross margin percentage and operating expenses for the second half of 2006 to be in line with the first six months of this year. We expect to continue to record valuation allowances against our deferred tax assets and our effective tax rate to be at or about zero.

Finally, we expect capital expenditures to be approximately $5 million for the year. And, now, I would like to turn the call back to Tom McLain.

Thanks, Jordan. In closing, I want to again emphasize that Nabi Biopharmaceuticals is focused on achieving success for its shareholders. We take our work seriously. We continue to aggressively execute on our growth strategy, and while we are excited and encouraged by the programs currently in place, we are also cognizant of the challenges that we face and the work that lies ahead.

With continued dedication and commitment of the Nabi Biopharmaceuticals board of directors, our management team and our hardworking employees, we are confident that our company will succeed in its mission to deliver high-quality biopharmaceutical products to address significant medical needs.

We appreciate your joining us this afternoon, and I would now like to open the call to questions. Jordan and Raafat Fahin, Senior VP, Research, Technical and Production Operations are here with me to respond to your questions.

Shanique?

[OPERATOR INSTRUCTIONS].

Our first question comes from the line of Jim Birchenough with Lehman Brothers. Please proceed.

Hi, guys. Just a couple of questions. Just to start with, a housekeeping item. Could you remind us, Tom, what your revenue guidance has been for the year? And then secondarily, just on the expense lines, R&D and SG&A was essentially flat from first quarter levels, and I'm just wondering if we should consider that as a run rate for those expenses, or whether we should assume that you'll have some further cost cutting in the second half of the year.

Sure. In terms of basic revenue guidance, we had projected that our antibody revenues would be essentially even with the prior year, as would our Nabi-HB revenues. We had projected, though, that our PhosLo revenues would increase and would be in a range of 36 to $38 million for the year. And, obviously, the other small revenue items are Aloprim and our contract manufacturing revenues, and those I think you should just think of as being even with last year's level.

And then just on the expense side, just what should we expect going forward in terms of R&D and SG&A? I guess I was expecting maybe some cost cutting in those areas. Should we expect that once the EPICK and CARE trials are done?

Well, certainly, those are commitments in clinical trial costs, and as the NicVAX phase IIb trial comes online the outside costs there will be funded by National Institute on Drug Abuse. In terms of SG&A, there's been some reduction in spending but because of some of those incremental costs that Jordan highlighted, we're not seeing the bottom-line benefit that we had expected to be seeing at this point, earlier in the year.

Okay, and then just following up on the panel meeting on Nabi-HB, could you maybe lay out for us what the upside could be for that product with a specific label for hep B positive liver transplant? In particular, I'm trying to get a sense of what your market share is right now, what you think it could improve to and what percent of patients are being discontinued after a year that could benefit from a second year of therapy?

Well, right now, our market share is actually very good and I think that it generally ranges from 80 to 85% of the market. Where we see the opportunity for improvement would be on increased utilization of Nabi-HB, particularly in the maintenance period where we are aware that there re a number of different protocols being used at transplant centers across the United States.

So we believe standardizing treatment protocol that the label would indicate is best in preventing reinfection could increase overall utilization. In addition, as you mentioned, we are aware that because the use today is off label, some carriers do discontinue coverage for Nabi-HB after 12 months. In both cases, it's difficult for us to specifically project that for you at this point, and I think by the time we understand more fully what action the FDA is taking and the timeline for that action that we'll be able to come back to you with estimates that will be very indicative of what we expect for next year and what the potential is for us.

But, certainly, we hope that it can be significant.

Great, thanks for taking the questions.

Thank you, Jim.

Our next question comes from the line of Mark Schoenbaum with Bear Stearns. Please proceed.

Hey, how are you doing? Thanks for taking my question. Just a little bit of a follow-up on Jim's question.

Great.

I've got in my notes like R&D guidance of a 40% R&D cut from '05 levels and a one-third reduction in '05 SG&A. Is that - can you reaffirm that guidance?

There are two elements there, Mark. One is the R&D guidance, and that was without two elements. One is it was without the addition of the ATG-Fresenius S program, so that would be an increased expense, and it was without the partnership agreement with Kedrion of the Civacir program. Because the ATG trial is ongoing and the Civacir trial is going to be initiated in the second half of the year, it's not going to perfectly offset in '06. I think that it will be an offset in '07 and beyond, so that is why we're suggesting that you should think about R&D expenses in second half of the year to be approximately what we spent in the first half of the year.

That may not get you to just down to $40 million kind of spend rate. On the SG&A side, while we have put the expense reduction initiatives in play and we are beginning to benefit from those, what we tried to outline is that there are some incremental expenses, both related to the Medicaid rebate work that we are doing, as well as some of the compensation programs that have been put in place, and we think that you should project SG&A in the second half of the year being comparable to what we saw in the first half of the year. Obviously, we continue to pursue aggressively other opportunities to reduce those costs. We're just not in a position to project those at this point in our guidance.

So I remember when you offered the convertible bonds last year, you made some comments about the rationale for that and how you like to run the business in terms of how much cash you keep on the books. And if I run through - I'm running through quick calculations, I mean, you could reach critical levels by the end of the year unless you do a decent partnership for PhosLo. And now with the manufacturing pushing out approval out in Europe, how should we think about your cash, how you're managing the business and the potential that you may need to tap the markets?

Well, from our perspective, what we're trying to do is maximize our utilization of cash, reduce the burn rate, certainly we would project a much different cash position or cash expenditure profile in the second half of the year versus the first half, because we'll be returning to a more normal level of biopharmaceutical product sales. And we're keeping our eye on the cash and our whole strategic focus has been on assuring that we are in a position to fund our investment in clinical studies in 2006 and 2007 and we will work to take the actions to assure that we...

The way you run the business, where is the critical cash level?

Well, what we've said in the past is that we like to be sure that we have somewhere between 20 and $30 million of cash on the balance sheet.

Okay, great, and then finally, and I'll just hop back in the queue, you mentioned biopharmaceutical revenue picking up second half. I guess you're talking about HB, and I still don't really understand the statements in your prepared remarks and the press release around what you did with this customer. So should shipments to this customer resume at a normal pace in the back half of the year, and should we expect an inventory build? I'm just a little confused around this whole topic.

Right, well, obviously, what we were trying to communicate is that in negotiating a supply contract with this major customer, we came to a difference of opinion on an element of the contract, and because of that that customer didn't place normal orders during the second quarter. Inventory of the product, Nabi-HB, is low with that customer at this point and we anticipate a resumption of normal ordering patterns in the second half of the year.

Have you resolved the differences of opinion?

No, we have not, but what's happened is is that when inventory levels of the product get low, the customer, if they're going to supply demand, will need to order product from us.

Okay, thanks, I'll hop back in the queue. I appreciate it.

Was that clear enough, Mark?

That helped a lot. I appreciate it.

Okay, good.

Our next question comes from the line of [Tom Schrader] with BMO Capital Markets. Please proceed.

Hi, good afternoon.

Hello.

I had a question about the maybe 20% of the Nabi-HB-like product market that you don't have, who are those people? Are those people you should expect to rapidly convert or are they long-time customers maybe with long-term contracts to I guess Baxter? Do you have any sense for how attainable that market is?

Well, that market is being supported by a product that is sold by a company called Talecris, and it's the product that is [BayHEP B]. They have one put up of the product on the market that we don't have, a 0.5 milliliter syringe, and we've not targeted that market. They do sell other put ups of the product, but it's based on our contracting both at the distributor level and at the maintenance level that we have been able to maintain and even grow our market share, and those relationships are important and we believe that the indication that we hope to achieve based on BPAC's recommendation will only strengthen our position in the market.

One thing that we'll be doing as well, Tom, is the uses off label, even though the product is infused IV in patients at the time of transplant, we'll be able to sell a put up of the product that is more designed for IV use if that may have some beneficial impact on sales of the product as well, simply because of the convenience that would be associated with that put up.

So based on this put up, you don't intend to ever provide - you have 80 to 85% of the market. What's the maximum obtainable percentage if you filled everything that you make product for? Do you have a sense of that number?

Probably 95% of the market, because the put ups that we're not developing are put ups that tare used to prevent infection after accidental exposure.

Right, okay. And kind of an analogous question, but on PhosLo, Medicare Part D maybe hasn't had the rapid effect that it might have. We're always led to believe that a third of the people were using Tums, and that everyone agreed that Tums was bad. How do you read the fact that conversion seems to be slow and steady? What do you make of that, what's going on in the market?

We sense that there's still a lot of confusion in the market, that there were pressures we understand from Medicaid organizations at the states to keep patients in their programs so that they continued to be viable and continued in existence. There was misinformation that was out there for patients around Medicare Part D. What we believe is that that period of getting education and getting comfort and familiarity with the program is kind of drawing to a close and we do expect that in the second half of the year we'll start to see people make the adjustment to the program to see things normalize more in terms of what we can expect for the long term.

What we do believe is in the second half of the year what patients who are on more costly therapies are going to start to experience the donut hole first hand or state programs that are trying to cover the cost of the donut hole will begin to incur those expenses. And, as that goes through, we are positioning ourselves to be out there with the economic message behind PhosLo so that people understand not only that it's a safe and effective treatment, but that there are significantly different consequences in terms of economics for patients that use PhosLo as their binder therapy.

Okay, and just real quick, it's been a year. Have the PhosLo price increases - are they all fully worked in?

We believe at this point in the third quarter that you will see the benefit of all of the price increases, because all of the contracts that follow after that price increase, all of those are now in place.

Okay, thanks.

You're welcome.

I think with our call, we probably have time for one more question, operator.

And our last question comes from the line of Joe Slavinsky with Thomas Weisel Partners. Please proceed.

Hey, guys, good afternoon.

Tom, you mentioned briefly in your prepared remarks, but does Cubist's announcement to stop development of [Hep XB] change your outlook on Nabi-HB at all going forward, or is this something you thought was likely given the long process that you've gone through with the FDA and the fact that you also have orphan drug status.

Right, well, you never count out a potential competitive development, so certainly as we projected the return for Nabi-HB over a 10-year period, we had begun to factor in the monoclonal product from Cubist. Certainly what that does now is it tells us - or it gives us encouragement that the return of Nabi-HB over an extended period will be much higher and certainly we think that polyclonal antibodies are very powerful therapies in these patient populations. They're effective and it really begins to help lay a great foundation for the hep C polyclonal antibody, Civacir.

So it certainly had impacted our long-range projections for the hepatitis B product, and it certainly gives us added confidence about the hepatitis C polyclonal antibody as well.

Is there a PDUFA date for Nabi-HB Intravenous?

No, there's not, because we had gone past the PDUFA date an then ended up with the advisory committee panel meeting. So what is normal now is that after the advisory panel committee meeting, to work with the FDA and to gain clarity as to how they intend to respond to the recommendation and on what timeline they'll respond to the recommendation. And as we can provide updates to you on that, we certainly will.

Great. Thanks.

Thank you. Again, I want to thank you for your participation on today's conference call and your interest in Nabi Biopharmaceuticals and we certainly look forward to updating you on the coming months of our continued progress in 2006. Have a good evening.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.