Vaxart Inc (VXRT) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Q2 2007 Nabi Biopharmaceuticals Earnings Conference Call. My name is Rob and I'll be your operator today. (OPERATOR INSTRUCTIONS) At this time, I'd like to turn the conference over to your host, Ms. Kari Mattox.

Good afternoon and thank you for joining us today. I'd like to remind you that today's call may include forward-looking statements. These forward-looking statements and related risk factors are more fully discussed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, both filed with the Securities and Exchange Commission. More information is also available at our website, nabi.com.

At this time, I'd like to turn the call over to Dr. Leslie Hudson, Interim President and Chief Executive Officer of Nabi. Les?

Thanks, Kari, and thanks to all of you for joining us on the call this afternoon.

During the on the Nabi side is Jordan Siegel. Jordan is the Chief Financial Officer of the company. Raafat Fahim. Raafat has a role as Senior Vice President of Research, Technical and Production Operations, but perhaps in this context of the call has just taken on a new role as Chief Operating Officer and General Manager of the Biologics Strategic Business Unit. And joining us also is Paul Kessler. Paul is the Senior Vice President for Clinical, Medical and Regulatory Affairs.

On this call, we're going to take you through our second quarter earnings and also give you a brief update on the announcement that we made today on a data update of our Phase II-B clinical trial for NicVAX which, as you know, is still ongoing.

As an overview, let me start by saying that the quarter was a good one from the financial perspective and actually also in terms of our development pipeline, and Jordan will give you more details on the financial front in a few moments.

But let me say, overall, the revenue stream has been robust. We're on track in the first half of the year for our expenses and cash burn. We're continuing to control the burn, and indeed we expect to realize an additional $6.3 million in annualized savings based on the reductions and (inaudible) we made when we successfully formed the two SBU's, Biologics and Pharmaceuticals, in June and July this year, respectively.

We've also done what we said at the beginning of the year we tried to do, which was to successfully defend our market position with regard to Nabi-HB. We're very pleased with this result. We know that it has been a challenge and it will be a challenge moving forward. We're not underestimating the competition or indeed their product in this regard, but we're very bullish and committed to Nabi as a product. We believe it is the gold standard, and we will continue to support it very strongly.

From a corporate perspective, we've accomplished several key milestones. The NicVAX trial, I'll tell you a bit about in a second. We've also worked with Cato Research and have now clarity on the regulatory path with the FDA for registration of Nabi-HB IV.

Equally importantly, we've continued to advance the strategic alternatives process with Bank of America Securities and have included it discussions with potential partners for our Biologics SBU as well as our NicVAX and StaphVAX programs. This has been a very high priority on the company's radar.

The two aspects of the strategic alternatives process in our partnership efforts are very critical at driving and building value for our shareholders, and clearly, success in this area is something that the management team is very much focused on.

Let me provide, first of all, then an overview of the NicVAX data, which is in two forms. First of all, we've had a deeper analytical dive into the six-month data and have been able to determine the therapeutic window for vaccine efficacy, meaning the level of antibody which controls the likelihood of abstinence in patients. So what we've determined is the lower level -- the threshold at which we first see abstinence -- and we can actually segment the patients in that regard. Those who fall below the threshold are not abstinent; those who fall above become abstinent. And then the upper limit of that window is a practical upper limit. It's an upper limit at which, if the antibody levels reaches that concentration, patients have a better than 50% likelihood of quitting smoking and remaining abstinent over long periods of time. Those are important determinations because it tells us how to aim the immunogenicity of our vaccine to be able to get sufficient patients within that therapeutic efficacy window.

The initial look at the nine-month data, which is new data, is quite positive, and it's very exciting for us to have this data, quite simply because, for the first time, we're now coming into phase with some of the data that's being published by Cytos, for example, by Chantix, around Zyban where we're now looking not just at acute abstinence, but chronic abstinence. What we've seen is that NicVAX continues to demonstrate efficacy and support of longer-term this chronic notion of smoking abstinence and is continuing with a favorable safety profile. Importantly, we've identified that the second regimen -- the five injections over six months at a dose of 400 micrograms -- is the most effective of the doses and schedules that we tested, and with this dose group, a statistically significant difference was seen compared to placebo over time in the intent to treat populations. So the list of data that you see there looks at the 400-microgram group which received five injections over six months, and you can see, looking at the fixed periods of time, 4 weeks which is what Chantix used; 8 weeks which is what in fact we used as our primary endpoint; then going out to 20 weeks and 34 weeks, getting now into the territory where, in fact, chronic abstinence and the prevention of relapse becomes really significant. You can see that NicVAX compared to placebo has actually attained a very striking statistical significance, both at 20 weeks and at 34 weeks, with an active therapeutic effect which puts it in range with the competitive products, and we can talk about that perhaps in the Q&A if there's interest. This trial, which gave us proof of concept in May, continues to provide positive data over the longer term. We intend to update you in greater detail regarding these nine-month data, and as the full analysis becomes available over the next couple of weeks, we'll actually be presenting that in public. We're slated to speak at several conferences early in September, and we will announce those conference details and presentation specifics in August.

Now let me turn to the call over to Jordan Siegel for a review of the quarter. Jordan?

Thank you, Les.

Total revenues for the second quarter of 2007 were $20.9 million, compared to $20.4 million during the second quarter of 2006. The net loss from continuing operations was $5.3 million, or $0.09 per share, compared to $13.7 million, or $0.22 per share during the 2006 period.

Results for the second quarter of 2007 included a $2.6 million gain from the sale of Aloprim, which is classified in Other Income Net in our Statement of Operations.

For the six months ending June 30, 2007, total revenues were $44.6 million, 12% higher than the $39.9 million reported last year. The net loss from continuing operations for the first half of the year was $16 million, or $0.26 per share, compared to $29.1 million, or $0.48 per share, during 2006, a reduction of 45%.

Cash used in operating activities from continuing operations during the first half of 2007 was $13.1 million, a 53% reduction compared to the $27.7 million during 2006. We ended the second quarter with cash, cash equivalents and marketable securities totaling $103.9 million.

As Les has previously mentioned, during the last several months, we completed the realignment of our businesses into two strategic business units -- Nabi Biologics and Nabi Pharmaceuticals -- and created a corporate shared services group to support these two SBU's. Accordingly, we have revised our segment reporting disclosures and have included a supplemental table in our press release.

Revenues for Nabi Biologics were $20.8 million for the second quarter, 5% higher than the comparable 2006 period, led by higher sales volume of Nabi-HB. Revenues for Nabi-HB were $8.7 million, $1.5 million higher than the $7.2 million reported during the second quarter of 2006. Sales of antibodies remained relatively constant between the two periods.

Gross margin for the second quarter of 2007 was $9.2 million, compared to $6 million during the 2006 period, an increase of 53%. The improvement in gross margin was attributable to Nabi Biologics which benefited from higher Nabi-HB sales, the receipt of a $1.2 million insurance settlement and higher utilization of our manufacturing facility. This higher utilization resulted in a $1.9 million decrease in unabsorbed overhead in the current quarter compared to last year. Consistent with our manufacturing plan, we expect a decrease in plant utilization during the remainder of 2007, which will have a negative impact on our margins compared to the first half of this year.

Selling, general and administrative expenses were $8.6 million, or 41% of revenues, for the second quarter, compared to $11.1 million, or 55% of revenues, during the 2006 period. This decrease was primarily due to lower selling and marketing-related expenses by Nabi Biologics and our efforts to reduce our overall infrastructure costs.

Total research and development expenses were $9 million for the second quarter, compared to $8.9 million during the second quarter of 2006. Nabi Biologics' research and development expenses were $6.2 million, compared to $2.5 million during the 2006 period. The increase in R&D expenses for Nabi Biologics reflected a focus on activities related to our Civacir, Anti-D and IVIG development programs. Nabi Pharmaceuticals' research and development expenses were $2.8 million, a 56% reduction compared to the 2006 quarter. This is reflecting a decrease in StaphVAX spending and a $900,000 benefit related to NicVAX under our grant from the U.S. National Institute on Drug Abuse.

As we look forward to the remainder of the year, we expect total revenues for 2007 to be in the range of $82 to $85 million. While we expect end-user demand for Nabi-HB to remain strong, we do expect a decline in our Nabi-HB revenues during the second half of the year due to the recent award of the Novation private label business to a competitive product. As a result of this award, we expect our wholesaler customers to sell through their remaining Novaplus Nabi-HB inventory and not restock the product. We expect full-year Nabi-HB revenues to be in the range of $30 to $33 million.

We expect our gross margin percentage to decline during the second half of the year when compared to the first half, but we expect the full-year gross margin percentage to improve slightly when compared to 2006.

Selling, general and administrative expenses for the full year are expected to decrease by approximately 20% compared to 2006 due to reduced selling and marketing expenses by Nabi Biologics and our continued efforts to reduce our infrastructure costs.

Research and development expenses for 2007 are expected to increase by approximately 10% versus 2006. The increase in research and development spending is primarily related to a change in strategy to forego potential partnership opportunities for some of Nabi Biologics' development programs while the company is conducting its strategic alternatives process.

For the year, we expect cash used in operations from continuing operations to decrease by 10 to 15% from 2006, and our estimate of capital expenditures will be up to $2 million for the year.

And now I'd like to turn the call back to Les.

Thanks, Jordan.

So now, operator, Rob, if you'd be so kind, let's turn the call over to the Q&A part of the session please.

Thank you, sir. (OPERATOR INSTRUCTIONS) And sir, please give me a moment while I gather up your first question. And sir, your first question today is going to be coming to you from Mark Schoenebaum from Bear Stearns.

Hello? Hi, Les. Sorry. What's the rule on this call? Two questions? May I ask two questions?

Go for it.

Okay, great. Okay. Maybe I'll start with Nabi-HB. Thanks a lot for the crystal clear press release. Very transparent. It was very -- I found it to be very helpful. I just had one question. Was the blind in this trial maintained throughout the time periods that -- where you've given the efficacy data?

Do you mean NicVAX, Mark? You said Nabi-HB.

I'm sorry. NicVAX. I'm sorry.

That's okay. No, absolutely. The blind will be maintained all the way through to the end of the trial at 12 months.

Okay. And then -- and since you so nicely laid out the ITT, it might be interesting then to explore some subgroups, and one of those is the subgroup that you had presented at the Vaccine Conference a month or two ago and on your last call. Can you talk at all about trends seen at nine months in the antibody responders? Was that maintained? Was there still a correlation between antibody response and abstinence?

Yes. So obviously, you will realize that we're talking top-line here because we've got to actually complete the analysis, but what we're seeing is that the trends that we reported were actually maintained, and we were obviously very pleased to see that a schedule and a dose popped out in the ITT population, and we're really looking forward to being able to complete this analysis, even of the six-month and the nine-month data, and actually have the opportunity of giving a full public presentation. We've got those slated, as I mentioned earlier.

Okay, great. And then my final and -- I guess that was three actually. My final question is the Novation part of the Nabi-HB revenue base, can you give us any kind of percentage, for example, for -- what percentage of the Nabi-HB business it was, maybe in the first half of '07 and maybe for 2006?

So this is Raafat Fahim, and the percentage of Novation was approximately 30 to 35%.

And that was for what time period, Raafat?

For the first half of the year.

Okay. Thanks. I appreciate it. I'll get back in the queue. Thanks.

(OPERATOR INSTRUCTIONS) Sir, we have your next question coming to you from Kathy [Reach] from J. Giordano.

Hi. Good afternoon. I just wanted to ask a couple questions relative to the strategic alternative process. First, is there an actual set time schedule in place for Bank of America since obviously a lot of people thought that that would have been completed by the first half of this year? And secondly, during your presentation, you mentioned the words partner and partnership a lot, and I just didn't -- I just wondered if that was the way that you were focusing on this process at this point? And thirdly, just from my knowledge of the U.S. plasma business, I know that your collection centers are very specialized, and I'm sure that those would be easily gobbled up, I guess is a good way to put it -- by someone, so I didn't know if you were using those to kind of strategically help you maybe kind of place the rest of your Biologics unit.

So Kathy, hi. This is Les. Maybe if I can start, I'll take the first couple of questions and then I'll get my colleagues to chime in as we go through them. First of all, in terms of the B of A process and the time scale, one of the things which I tried to signal and guide is that the focus on the sale of the Biologics business, which is actually one of the core parts of our strategic alternatives process, really started when I came on board. I came on board towards the end of February, and that's really when that focus came to our strategic alternatives process, and indeed, what you I'm sure recognize, the focusing of the company into the two SBU's is to actually help enable and support that outcome. So I've been on board just over five months and I think that's probably a time period which would be extremely impressive had we been able to actually come to a successful conclusion in that sort of time scale, particularly as what we're looking at is something which is basically the sale of an ongoing business here. So I think the time scale you ask for -- is there a date? Yes, and the date obviously is as soon as possible --

Okay.

In time. I think you know as well as I do the sort of general industry experience in terms of the time scale of being able to actually accomplish those sorts of things. In terms of partnering and partnerships, thank you for actually giving me the opportunity of clarifying that. What we're talking about here in terms of the Biologics SBU, which is actually by far and away the biggest part of Nabi, really is that that is being offered through Bank of America as an asset sale, pure and simple. The partnership part of it, though, alludes to the other major value which is in our company, which is the StaphVAX and the NicVAX programs, where to take those forward, because of the nature of the opportunities they represent, really require a large-scale commercial partner, and indeed the commercial partner will be most effective if they come on board before we start Phase III. And if that comes up again later in the questions, maybe we can go into it in a deeper answer and more detail. In terms of the plasma centers, it's a situation where we do have what are commonly referred to as the gold standard plasma centers. They're specialized in the sense that they are optimized for collecting plasma, for being able to collect, in particular, types of plasma which other companies can't do in the United States, and I'll hand over to Raafat just to give you a brief overview of that, but I think before I pass on, the sale will be for the whole of the Biologics operation. That's very important. But let me just give him an opportunity of sounding our horn with regard to our excellent plasma centers.

Hi, Kathy. Certainly from the plasma collection centers that we have, as Les mentioned, they are considered to be gold standard because of the (inaudible) optimization and quality as well as the scope, in essence of our (inaudible) products that we produce. So these plasma centers provide not only the revenue base that we enjoy, but in addition to that, they provide an important strategic base for the Nabi Biologics and it cannot be segregated from the rest of the Biologics because, as a whole with the plasma collection centers as well as the rest of the Biologics centers, becomes extremely strategic business for an interested party to look at.

Okay. Thank you very much. I'll get back in the queue. That helps a lot.

Thank you. (OPERATOR INSTRUCTIONS) And sir, we have a question from Ajim Tamboli.

Hi. On Nabi-HB, you guys mentioned that there would be some destocking and I was hoping that you could quantify the inventory levels there. And then also, have there been any pricing changes for the product?

Okay. From an inventory, we have not seen -- during the second quarter, we actually saw a slight decrease in inventory stocking levels at the wholesalers, primarily around Novation Nabi-HB private label. Again, with the 30, 35%, we do not -- we have several months of inventory in the pipeline. Specifically quantifying that -- I don't have that figure here, though. But we expect that to be bled out during the third quarter. And regarding price changes, we have not at this point changed our pricing for the product.

And I guess how does the pricing compare relative to the competition, including the recent entrants, at this point?

It certainly would be -- this is Raafat Fahim. The pricing that you see for Nabi-HB compared to the competition is approximately -- what we hear now is that approximately 10% differential between us and the competition.

Okay. With Nabi-HB being lower, I guess?

Being higher.

Being higher. Okay. And then on the NicVAX data, it's encouraging to see that you're seeing trends with the 400-microgram dose that would help you choose that dose. Maybe if you could elaborate what gives you confidence that's the right dose and schedule, including maybe any further detail you could give on data at the lower dose and at any higher doses that have been previously explored.

So you'll remember, Ajim, that in fact the trial explored two schedules and also two doses. The 400-microgram schedule 2 is the one which basically has showed statistical significance as well as, in fact, collecting the largest number of abstainers, but you could see trends in the other data set, and when we actually have the opportunity of actually going through the presentation of the analysis -- having completed the analysis in depth, clearly you'll see what we believe is there, which in fact is not only have we now been able to see a very clear difference, but in fact the data to date in terms of dose selection -- because we've run several immunogenicity trials -- point towards this as being a good dose, and the regimen equally stands out as being one which is clearly superior, and we will be releasing that data in -- to the fullest extent when we complete the analysis.

Okay. And then you mentioned a practical upper limit. I guess, what defines a practical upper limit for you, and I guess what setting at that limit?

Well, so you could imagine what one does is you look at patients' ability to respond versus the amount of antibody that they produce. Remember the question which Mark was asking about, the subgroup in that analysis we'd done earlier. We've done a lot of in-depth analysis looking is there a unique -- now not percentile, but concentration? So micrograms per mil of antinicotine antibody, which actually causes the responder group -- those who are abstinent or not abstinent -- that actually causes it to segregate into two groups -- those that are above the threshold and those that are below the threshold -- and we see a very clear separation. So that's the first thing that one needs to define with a vaccine. How much antibody do I need to get before the patients start getting the clinical effect that I'm hoping for? Now you can see that equally importantly is how far can I push it? How far do I need to push it? In other words, what's the practical upper limit -- the target upper limit -- where I get, for example, better than a 50/50 chance of quitting smoking. As you will appreciate, those are extremely favorable odds. And what we've got now is a complete family of curves for each week of the trial where we understand now in great depth the shape of the curve above the threshold, and so that then gives us that therapeutic window into which now our vaccine will need to bring, for example, 80% of the patients, and it's that analysis which has really driven a great deal of excitement around the project. It really has taken on traction in a way that is really very pleasing, and I hope that's coming across to you.

So when can we expect further detail on this data to be presented? What venue do you expect to do that in? And then what are -- I guess this is going out to 56 weeks -- what are the next data releases we can expect between now and then?

So we already actually had put out a list of scientific meetings where we'll actually be giving the whole 12-month data. That's on our website. And as I just said previously, during this month, we will actually get a couple more in August where basically we will announce the details of the presentations early in September. And the data we'll be announcing will obviously be the outcomes data. What we won't be announcing, unfortunately, in this context is the threshold value, or the shape of the response curve in the sense of the calculation of the likelihood of quitting versus antibody concentration. The reason for that, as you can actually understand instantly, it is of very great competitive importance. There are about three or four companies that have vaccines now that are different types of vaccines in terms of the carrier, but effectively they're all aiming to produce antinicotine antibodies, and once you have the antibodies, the vaccines, I suspect, will behave in the same way, and I think this gives us a very clear, early differentiation with the degree of development of our program. This is getting very, very interesting and highly competitive.

And a last question for an update on enrollment with Civacir. How's that going? And also a status of the resubmission of the HEBIG application in Europe? Thanks.

So Ajim, this is Raafat Fahim. Certainly for Civacir, it's progressing well as you know and we don't comment on recruitment rates and where we are, but it's certainly progressing for Civacir. And on HEBIG, we intend to refile, resubmit within the next few months.

(OPERATOR INSTRUCTIONS) And sir, it looks as if I have no questions for you at this time.

Leslie Hudson. Okay, Rob. Thank you very much indeed, and also thank you to all our call participants for joining us today. As you've heard, there have been several significant events ongoing and actually on the horizon for Nabi. The NicVAX data, which I'm really looking forward to personally being able to actually talk about and discuss in greater detail; the strategic alternatives process for Nabi Biologics; partnering process for NicVAX and StaphVAX; as well as the full regulatory approval of Nabi-HB. These are undeniable catalysts and value drivers for the company and also obviously for its shareholders and stakeholders. I want to thank you all for your attention and questions and also your continued support as we move forward. Thank you and good afternoon. Thank you, sir. And thank you again, ladies and gentlemen. This brings your conference call to a close. Please feel free to disconnect your lines now at any time.