Vaxart Inc (VXRT) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter Nabi Biopharmaceuticals earnings conference call. My name is Christy. I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today's conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to the host of today's conference, Mr. Greg Fries, Manager of Investor Relations. Sir, please proceed.

Thank you, Christy, and good afternoon, and thank you for joining us today. As a reminder, the news release announcing our first quarter 2008 financial results is available on our Web site at www.Nabi.com. I'd also 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 29th, 2007. More information is also available on the Web site at www.Nabi.com. At this time, I'd like to turn the call over to Dr. Raafat Fahim, President and Chief Executive Officer of Nabi. Raafat?

Thank you, Greg, and thank you all for participating in the call. Joining me for today's call is Dr. Paul Kessler, Senior Vice President, Clinical, Medical and Regulatory Affairs. On this call, I'll be talking to you about our first quarter financial results; but before we review the financial results, I'd like to discuss a few other topics.

As you may know, we held our annual meeting of stock holders yesterday in Bethesda, Maryland. Nearly 90% of the outstanding shares of the company's stock were represented at the meeting to vote on two proposals. The election of directors to a one-year term and the ratification of appointment of the independent registered public accounting firm for the 2008 fiscal year. Stock holders elected all 10 director nominees on the board and ratified the appointment of Ernst & Young LLP as the company's independent registered public accounting firm. I know that many of you are interested in the progress of our strategic alternatives process that we announced in January. This process is focused on, but not limited to, the sale or merger of the company. While I can't provide specific details on our progress, I will say that interest in Nabi and our promising developmental vaccine pipeline products remains strong. The objective is to realize the maximum potential value of our assets, whether it is through a sale or merger or a strategic partnership. We believe that being open to all of these options positions the company to evaluate and select the best path forward. The successful out come of this process remains the key corporate goal for 2008.

We have also set three developmental milestones for 2008. The first is a phase II schedule optimization study for NicVAX. The purpose of this study is to confirm the availability of an optimized schedule that includes an additional dose to achieve a higher anti-body level in a larger proportion of vaccinated subjects at the critical target quit dates. The study is underway, and we expect initial data regarding the effect of the dose schedule to change around the middle of the year. Secondly, we will initiate a phase III safety 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, better align the target quit date with peak anti-body levels, and increase the frequency of counseling. Depending on the strategic alternatives progress, and partnership time lines, this phase III study will 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 extremely significant market opportunity for which NicVAX should capture a good percentage. Therefore our R and D plan is to move forward in the most efficient and expeditious manner so as to not lose our momentum to 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.

And thirdly, we are advancing the development of two new antigens of our Pentosan program in order to enable the initiation of phase I clinical trials in early 2009. Last week, we announced that the European patent office or EPO upheld the primary patent claim for NicVAX, our proprietary investigational vaccine for treatment of nicotine addiction and prevention of smoking relapse. This claim gives Nabi exclusive use of NicVAX for treating and preventing nicotine addiction. We are very pleased with this positive ruling. This patent was awarded to us in October of 2004, with an expiration date of 2019. In the middle of 2005, a competitor, Cytos Biotechnology, filed an opposition against the patent, and we filed our response in December of that year. The EPO issued this ruling during an April 23, 2008, hearing. The ruling also canceled some ancillary claims in the original patent. Although we intend to appeal these cancellations, they are not essential. This ruling does not affect in any way our ability to develop and commercialize NicVAX in Europe.

Late last year, we announced a 65 million share repurchase program, and I'm pleased to report that we have made good progress with the program. During the first quarter, we repurchased 4.5 million shares of our common stock for a total of $16.9 million. Since announcing this program, we have repurchased 9.5 million shares of the common stock, for a total of $35.2 million, leaving a balance of $29.8 million from the original authorized amount. In authorizing this repurchase program, the board did not designate a target completion date, but the process is going, and we will continue to report our progress quarterly.

Now let me review the first quarter financial results. For the first quarter, the net loss from continuing operations was $6.7 million or $0.13 per share, compared to a net loss of $13.9 million or $0.23 per share in 2007. Including the results from discontinuing operations, the first quarter 2008 net loss was $6.2 million, or $0.12 per share compared to a net loss of $11 million or $0.18 per share in 2007. General and administrative expenses was $5.1 million compared to $8.3 million in the first quarter of 2007, a decrease of 38%. This decrease reflects a scale of operations after the sale of the biologics business unit and our continued efforts to reduce the overall infrastructure costs. Research and development expense was $3.2 million compared to $6.1 million in 2007. This decrease is related to reduced overhead costs from our realigned business and reduced spending on NicVAX.

The spending reduction for NicVAX is principally due to the timing of development efforts in 2008. We expect R and D expense for NicVAX to increase in the second half of this year, on the assumption that we initiate a phase III study before year end. Net cash used in continuing operations was $5.3 million during the quarter, compared to $13.9 million in the first quarter of 2007. We ended the quarter with cash, cash equivalents and marketable securities, totaling $197.7 million. This balance includes $5.4 million collected by Nabi from sales of Nabi HP that is owed to Biotest Pharmaceuticals. In addition we have $10.1 million of restricted cash that is related to the sale of the biologics business unit. This cash is being held in escrow to support any potential indemnification claim made by Biotest and the balance of this account will be released to Nabi in April of 2009. As of March 29, 2008, Biotest had not asserted any indemnification claims.

For guidance, in February, we provided our initial 2008 financial guidance estimates for operating expense and cash used in continuing operations. At this time, our expectations -- at that time, our expectations were a reduction in general and administrative expense of approximately 40% for 2008, compared to 2007. We also estimated an increase in research and development expenses of approximately 45% compared to 2007, based on the assumption that we will move forward with a phase III study for NicVAX later this year. Overall, we expect total operating expenses to decline slightly when compared to 2007. We also expect that cash used by continuing operations to decline by approximately 15%, compared to 2007, on the assumptions that we initiate a phase III clinical trial for NicVAX in the second half of this year, and that short-term interest rates remain stable. This guidance was for planning purposes, and was based on the absence of a strategic transaction. The first quarter behind us, we are maintaining our initial guidance going forward.

That concludes our prepared remarks. Operator, let's open the call now for questions.

(OPERATOR INSTRUCTIONS). Stand by for your first question. And your first question comes from [Richard Mensuri of DCM Fund]. Please proceed.

Hi. Thank you. This question about the patent issue that you were discussing, is the implication that when and if Cytos gets its vaccine to market that it would be theoretically infringing on your patents.

No. That patent does not prevent Cytos from marketing their products. The recent they have closed the patent is simply because they didn't want the competition in Europe.

Understood. Okay. Great. And then, separately, I understand -- I understand you can't really provide details regarding the strategic process; but, you know, in the press release, you talk about interest by several parties. How can you -- can you at least characterize that interest, and would you say that that interest involves all of the scenarios that you're investigating?

Yes, Richard, and that is absolutely true. This involves all of the scenarios, interest from companies who are interested in the entire company or interested in NicVAX alone or interested in Pentostaff alone. It's the whole gamut.

Excellent. I appreciate it. Thank you.

Thank you, Richard.

An your next question comes from [Martin Caine], a private investor. Sir, please proceed.

Good afternoon, Dr. Fahim.

Good afternoon, sir.

How are you?

I am doing very well. How are you doing?

I'm very good. Thank you. My question is concerning Bank of America. When you switched over to help -- for them to help you with your strategic alternatives, did they ever give you a valuation as far as what they thought either NicVAX or StaffEX or in this case, Pentostaff is worth in helping to determine where you were going?

Yeah. As you can imagine, obviously all of these modeling, and all of these assumptions happen at the beginning and continue to happen throughout the process, yes, they did.

Is that private information? Because I don't recall ever seeing a valuation placed through Bank of America.

Yes. Obviously these are things we cannot talk about. As you can imagine, if we talk about them, it jeopardizes the process completely.

All right. So you can't share that with us?

No, I cannot.

Okay. One other quick question regarding this patent issue. With the upholding of the patent issue in Europe, has that spurred any additional interest from other companies?

It certainly removed some of the concerns that the companies may have.

Okay. And is this -- is the interest still robust, or is it fairly stable now?

As characterized, the interest remains strong.

Okay. Good. Thank you very much.

Thank you.

Bye.

(OPERATOR INSTRUCTIONS). There are no questions at this time.

Okay. Great. Thank you, operator. As you have already heard today, we have experienced several positive events this past quarter. We have made solid progress through the share repurchase program. We received a very favorable patent ruling through the European patent office that protects our exclusive use of NicVAX to treat and prevent nicotine addiction, and we continue to have discussions with multiple interested parties regarding our strategic alternative process and strategic partnership process. We are on schedule with progress toward the clinical milestones we established for 2008 and our financial performance through the first quarters in line with our expectations. Our effort and dedication to accomplishing our corporate and clinical goals will deliver the catalyst that will ultimately drive value for Nabi shareholders and stake holders. The company and its board remain fully committed to moving these processes forward and to a successful out come. Again, thank you for all of you in participating in today's call, and thanks for your continued support as well. Thank you.

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