Vaxart Inc (VXRT) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 and year-end 2007 Nabi Biopharmaceuticals earnings conference call. My name is Antoine and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Mr. Gregory Fries, Manager of Investor Relations. Please proceed, Mr. Fries.

Thanks, Antoine. Good afternoon and thank you for joining us today. I would 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 September 29, 2007, both filed with the Securities and Exchange Commission. More information is also available at our website, www.Nabi.com.

At this time, I would like to turn the call over to Dr. Raafat Fahim, President and Chief Executive Officer of Nabi.

Thank you, Greg. Thanks to all of you for participating on our call. Joining me today on the call our Jordan Siegel, Senior Vice President of Finance and Administration and Chief Financial Officer and Treasurer, as well as Dr. Paul Kessler, Senior Vice President Clinical, Medical, and Regulatory Affairs. On this call, we will be talking to you about our fourth-quarter and full-year financial results.

But before we review the financial results, I would like to begin with a few remarks about our recent changes here at Nabi and our path going forward. 2007 was indeed a year of remarkable change for our Company. We reorganized into two strategic business units, biologics and pharmaceuticals, and created a streamlined corporate structure with a right-sized workforce.

In addition, we made significant progress towards maximizing shareholder's value. Hence, in September, we announced the sale of our biologics strategic business unit for $185 million in cash. In November, we announced exciting results of our one-year data from the Phase IIb proof of concept study of NicVAX. Just as a reminder, results of this study indicated that antibodies generated in response to NicVAX vaccination correlate with long-term and continuous smoking abstinence. In addition, the NicVAX safety profile was very favorable and not different from placebo.

In December, we successfully completed the sale of the biologics unit. This was an efficient and effective process and one that garnered the overwhelming support of our investors. With the sale of the biologics business unit complete, we are now focused on the vaccine pipeline and strengthening the Company's financial position to continue our endeavor to maximize shareholder's value.

Our two lead programs in clinical development have the potential to satisfy critical unmet medical needs and address a significant market potential. NicVAX for smoking cessation and prevention of relapse and StaphVAX, for the prevention of Staph. aureus bacterial infections including the most dangerous and prevalent strains.

On the financial front, late last year we announced $65 million share repurchase program. For the year ended December 29, 2007, we repurchased 5 million shares at an average price of $3.66 per share. We also continued to improve our financial position by repurchasing $38.8 million par value of our convertible senior notes late last year. We feel that all of these steps have better positioned Nabi to truly unlock the Company's value and potential.

As such, early in 2008, we announced the start of the new strategic alternatives process that is focused on but not limited to the sale or merger of the Company, in order to more fully maximize the value of our most promising assets, namely NicVAX and StaphVAX. The successful outcome of this process is the key corporate goal in 2008. This process is running in parallel and we think complementary to our ongoing partnership efforts for NicVAX and StaphVAX. We intend to realize the maximum potential value of our assets, whether it is through a sale or merger or a strategic partnership. We believe that by pursuing all of these options that we are enabling the Company to analyze and select the best path forward.

To date, we are seeing significant interest in the Company and as expected, NicVAX in particular. As such, we are currently in discussions with a number of interested parties. As we move forward throughout our key corporate goal of the statistic alternatives process, we are also working toward three development milestones for 2008. First, we have initiated a Phase II schedule optimization study for NicVAX. The purpose of this study is to confirm the ability of NicVAX in an optimized schedule that includes an additional dose to achieve a higher antibody level in a larger proportion of vaccinated subjects at the critical target quit date. We expect data from this study around the middle of the year.

Secondly, we will initiate a Phase III safety, immunogenicity and efficacy trial for NicVAX in the second half of this year, after discussions with the FDA. In this trial, we expect to follow the schedule established in the current schedule optimization Phase II study to better align the target quit date with peak antibody levels and increase the frequency of counseling.

Depending our partnership timelines and strategic alternatives progress, this Phase III study would ideally be initiated with a strategic partner that would work with us to finalize the trial design. That being said, we feel that smoking cessation represents a critical unmet medical need and an extremely significant market opportunity, of which NicVAX should capture a good proportion. Therefore, our R&D plan is to go forward in the most efficient and expeditious manner so as not to lose our momentum towards the marketplace.

We believe we have the opportunity to be first to market with a safe and effective smoking cessation vaccine, which would result in a distinct competitive advantage.

Thirdly, we will advance the development of new antigens of our pentavalent StaphVAX program so as to enable the initiation of Phase I clinical trials in early 2009. As you can see, we are working on several key initiatives this year, all of which are intended to maximize the value of our promising assets and hence increase shareholder's value.

Now let me turn the call over to Jordan Siegel for a review of our quarter and full-year results. Jordan?

Thank you, Raafat. As Raafat mentioned earlier, on December 4, we sold our biologics business and certain corporate shared service assets to Biotest Pharmaceuticals for $185 million, of which $10 million was placed into an escrow account to be used for any valid indemnification claims that are asserted on or before April 15, 2009.

As a result of this transaction, the results of our biologics business and related assets as well as our Aloprim product line have been reclassified as discontinued operations. These products included all of our revenue-generating products. Additionally, we recorded a $79.7 million pre-tax gain on the disposal of discontinued operations in the fourth quarter related to this transaction.

For the full year, the net loss from continuing operations was $39 million or $0.65 per share, compared to a net loss of $60.6 million or $1 per share in 2006. Including the results from discontinued operations, net income for 2007 was $47.1 million or $0.78 per share, compared to a net loss of $58.7 million or a loss of $0.96 per share in 2006.

For the quarter ended December 29, 2007, the net loss from continuing operations was $4.2 million or $0.07 per share. This compared to a net loss of $14.9 million or $0.24 per share, an improvement of 72%. For the full year, selling, general, and administrative expense was $26.1 million compared to $32.6 million in 2006, a decrease of approximately 20%. This decrease of $6.5 million reflects our continued efforts to reduce overall operating costs.

Research and development expense for 2007 was $18.8 million, compared to $28.7 million during 2006. This decrease includes a $4.8 million reduction in overhead cost as we have realigned our business to focus on our remaining product candidate as well as a $2.4 million reduction in spending on our NicVAX program due to the timing of development activities.

We incurred lower expenses related to our NicVAX program during 2007 in comparison to 2006 as 2006 included the initiation and completion of enrollment of our Phase IIb proof of concept study and the manufacture of clinical material. Other income for 2007 primarily consisted of a $3.6 million gain related to the repurchase of $38.8 million in principle of our convertible senior notes.

Total cash used in continuing operations was $42.6 million for 2007 compared to $61.7 million in 2006. Including discontinued operations, total cash used was $26.7 million, compared to $43.9 million in the prior year, a reduction of 39%. We ended 2007 with cash, cash equivalents, and marketable securities totaling $219.2 million.

Looking forward for 2008, the guidance we are providing today is for planning purposes based on the absence of a strategic transaction. As we transition our corporate shared service functions to a smaller staff in Rockville, Maryland, we expect general and administrative expenses to decline by approximately 40% for 2008 when compared to 2007. We expect research and development expenses to increase by approximately 45% based on the assumption that we will move forward with a Phase III study for NicVAX later this year. Overall, total operating expenses are expected to decline slightly when compared to 2007.

We expect cash used by continuing operations to decline by approximately 15% compared to 2007. Again, depending on the timing of the initiation of a Phase III clinical trial for NicVAX and short-term interest rates.

Now I would like to turn the call back to Raafat.

Thank you, Jordan. Operator, let's open the call for questions.

(OPERATOR INSTRUCTIONS) Stephen Dunn, Dawson James.

Thanks for taking my questions. I guess we still have $48.5 million left on the stock buyback authorization. And I guess Jordan just mentioned cash burn would be 15% of the 2008 -- or sorry -- 2007 ending cash. I guess how much of that $48.5 million are you looking to use for more stock buybacks and what price points do you -- are you only buying if it's under $4 or can you give us what you're doing?

Again, we certainly wouldn't -- we are not commenting on what it looks like in terms of parameters we have for the stock buyback, but we are in the market to buy stock and the program is ongoing.

Okay, two more questions. On the Phase III for NicVAX, your quote was it is possible with a strategic partner. I guess I'm not sure if that is really what you meant to say. On one hand, the Company is valuable at X if you sell the whole entity. But are you saying that you would take on a strategic partner for just the NicVAX program?

It's a very good question. Just to make sure I reiterate what I was saying on the call, a few minutes ago, we certainly our intent is to sell or merge the Company. There is no doubt about that. Having said that, we are in parallel seeking partnerships for NicVAX and separately for StaphVAX, so both. The reason for doing that is that we would like to have all doors open to maximize shareholder's value. In essence, if we get a much more favorable deal from a partner as opposed to the sale of the Company, that would be the best value for the Company. So we keep all options open, but our focus and our intent is sale or merger.

All right, because with all the cash in the bank I don't think it would behoove shareholders for you to partner out your NicVAX Phase III if you could pay for it yourself and nobody wants to buy the whole Company. That one looks a little squirrelly to me.

Follow-up question, on I guess we touched on it a little bit and [finally] the FDA issued on February 1 the warning on the CHANTIX and neuropsychiatric disorders. Again, the issue was in clinical trials people with a history of mental illness are excluded, but a high percentage of heavy smokers, some accounts over 40% suffer from mental symptoms. And I think we touched on the difference between CHANTIX, let's say, and NicVAX as one -- passes the blood/brain barrier, whereas yours does not.

I wonder if you can expand a little bit on the differences between CHANTIX and NicVAX?

Well you actually just outlined it very well, Stephen. In essence, we at NicVAX, does not at all operate on the central nervous system. So as you mentioned, it does not cross the blood-brain barrier. Antibodies are very large molecules and if they attach to nicotine, then they cannot cross the blood-brain barrier and therefore it is not expected that we would have side reactions profile that are typical of other drugs that work on the central nervous system.

From that perspective, it is clear then that the safety profile of NicVAX should be favorable and that's what we have seen so far in the clinic.

Has that -- has the topic come up in your the latest discussions with potential partners?

We always indicate with anybody we talk to the differences in mechanism of actions of NicVAX versus other drugs that work on the central nervous system. We certainly do outline that.

Okay, thank you very much.

(OPERATOR INSTRUCTIONS) Richard Mansouri, DCM Funds.

Just a couple of questions. One is actually, kind of a follow-on to Stephen's question about the psychological side effects that you are witness -- that people are witnessing with CHANTIX. A couple of weeks ago Sanofi came out and said that they were discontinuing development of their Phase I -- I'm sorry -- their Phase III compound. I think it's called Dianicline, and my understanding is that it was also due to possible psychological problems.

I'm wondering if you could comment on the implications of that for NicVAX and also whether you think that Sanofi for example is still intent on pursuing the smoking cessation market is my first question.

Just to reiterate, you are absolutely correct. We also read news reports that Sanofi-events had discontinued their Phase III program for Dianicline which also is a drug that acts on the central nervous system. We actually don't have any independent report or otherwise to indicate why they stopped it. I mean, your assumption that they stopped it because of side reactions may very well be true. We just don't know why they stopped it and they have not indicated in any of their releases why they stopped it. They just said they stopped it.

Certainly the implications of that on NicVAX is as I mentioned earlier, there shouldn't be any simply because we do not act on anything on the central nervous system and therefore NicVAX should at least from that perspective should have a very favorable side reactions profile, one that does not have any of those potential side reactions that have been seen with other CNS acting drugs.

Understood. Okay, thanks. Then secondly, there was a WHO study that came out a few weeks ago that talked about I think they are calling it the smoking epidemic in terms of the number of deaths that smoking is expected to cause in the 21st century. It certainly got a lot of press. Has that led to any increased interest in NicVAX or have you had any follow-on effect of that study?

It is a very good question, Richard. So I will answer it this way, that there is quite a bit of interest in NicVAX. Whether that is due to the side reactor genicity that others drugs acting on the central nervous system is seeing or the WHO report, it's very difficult to decipher. But certainly there is quite a bit of interest in nicotine -- anti-smoking nicotine vaccines.

Got it. Okay, thank you.

There are no further questions at this time. I would like to turn the call back over to Dr. Fahim.

Thank you, operator. And again, thanks to all of you for participating and joining us today. As you have heard today, it is an exciting and promising time for Nabi. We talked about the strategic alternatives process, the ongoing strategic partnership process for NicVAX and StaphVAX, as well as the clinical milestones. These initiatives represent the catalysts that will drive value for Nabi's shareholders and stakeholders.

The Company and its Board are fully committed to moving these processes towards a successful outcome. Thank you for continued support as we move forward.

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