Vaxart Inc (VXRT) 2008 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2008 Nabi Biopharmaceuticals Earnings Conference Call. (OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's call, Mr. Gregory Fries. Please proceed.

Thanks, Charissa, and good afternoon and thank you all for joining us today. As a reminder, the news release announcing our second quarter 2008 financial results is available at our web site, 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 disclosed in our annual report of form 10-K for the fiscal year ended December 29, 2007, and in our quarterly report for 10-Q for the quarter ended March, 29, 2008, both filed with the Securities and Exchange Commission. More information is also available on our web site, www.nabi.com.

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

Thank you, Greg, and thank you all for participating in the call. Joining me today is Dr. Paul Kessler, Senior Vice President of Clinical, Medical and Regulatory Affairs.

On this call, I'll be talking to you about our second quarter financial results. But, before I review the financial results, I'd like to discuss a few other important subjects.

I know many of your are interested in the progress of our strategic alternatives process. As you know, this process is focused on but not limited to the sale or merger of the company or the out-licensing of our product candidates. This process is progressing with interest from several parties.

We remain focused on maximizing the value of our assets for the benefit of all of our shareholders. This is our primary objective. We also established three development milestone objectives for this year.

The first was a Phase II schedule optimization study for NicVAX that is currently in progress. The purpose of this study is to confirm that an optimized schedule, which includes an additional dose, produces a higher antibody level in a larger population of vaccinated subjects at the target quit date.

About two weeks ago, we announced interim data that strongly supports this hypothesis. The data provided clear evidence that significantly higher levels of anti-nicotine antibodies can be generated faster and in a higher percentage of subjects that those observed in previous trials. This new immunization schedule results in immune response at 14 weeks that was higher than the peak antibody level achieved following the six months boosted dose in the Phase IIb proof of concept study. Significantly, the data indicated that more than 80% of subjects achieved the target antibody level at 14 weeks compared to 50% in the Phase II proof of concept at the same time point.

In addition, this revised dosing schedule was well tolerated. The adverse events profile in this study is comparable to previous NicVAX clinical studies. Achieving this higher antibody level earlier will allow smokers to realize the benefit of the vaccine earlier, thereby improving their ability to quite smoking and remain abstinent over the long term. And by significantly increasing antibody levels in the majority of the immunized subjects, we would increase the likelihood of success in the upcoming Phase III trial scheduled to begin later this year.

In this Phase III trial, we expect to follow the regimen established in the current schedule optimization Phase II study that will align the target quit date with peak antibody levels and increase the frequency of counseling. Smoking cessation represents a critical unmet medical need and an extremely significant market opportunity of which NicVAX should capture a good proportion.

We are maintaining our positive momentum and our leadership position to bring the first smoking cessation vaccine to market. Without a doubt, this is a distinct competitive advantage.

And we continue to advance the development of two new antigens of our PentaStaph program in order to enable the initiation of a Phase I clinical trial in 2009.

Earlier this week, we announced that we settled our arbitration proceeding against Inhibitex Incorporated. Under the terms of this settlement, Inhibitex will pay us a total of $2.2 million, $1.7 million in connection with the execution of the settlement and the remaining $0.5 million by October 15, 2008 with 5% interest rate from August 1, 2008.

I am pleased to reach this settlement and end this dispute, which originated two years ago. The total payments we will receive represent most of the disputed amounts and puts an end to future costs associated with this issue.

As most of you know, we announced a $65 million share repurchase program late last year. Since announcing this program, we have repurchased 9.5 million shares of common stock at an average price of $3.69 per share for a total of $35.2 million, leaving a balance of $29.8 million from the originally authorized amount. We did not repurchase additional shares during the second quarter. However, we did repurchase $31.6 million par value of our 2.875% convertible senior notes for $28.9 million, a $2.7 million discount, resulting in a $1.8 million gain.

As of June 28, 2008, we have $42 million par value of debt remaining on our balance sheet compared to $112.4 million one year ago.

Now let's review the second quarter financial results. For the second quarter, the net loss from continuing operations was $3.7 million or $0.07 per share compared to a net loss of $10.5 million or $0.17 per share for the same period in 2007. The $1.8 million gain on retirement of debt I mentioned earlier was recorded as other income and is part of continuing operations. Including the results of discontinued operations, the second quarter 2008 net loss was $376,000 or $0.01 per share compared to a net loss of $4.8 million or $0.08 per share in 2007.

General and administrative expenses was $2.9 million compared to $6.4 million in the second quarter of 2007, a decrease of 55%. This decrease reflects the reduced scale of operations after the sale of the biologics business unit and our continuing efforts to reduce overall infrastructure costs.

Research and development expense was $3.3 million compared to $4.7 million in 2007. This 29% 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 this year compared to 2007. We expect R&D expense to increase in the second half of this year due to the planned initiations of the Phase III study.

Net cash used in continuing operations for the six months ended June 28, 2008, was $13.1 million compared to $25.3 million for the same period in 2007 or a 48% decrease year-to-date. We expect this year-over-year gap to narrow during the second half of this year with the planned initiation of the planning NicVAX clinical trial.

We ended the quarter with cash, cash equivalents and marketable securities totaling $160.6 million. This balance includes $1 million collected from sales of Nabi-HB that we owe Biotest Pharmaceuticals. Not included in the $160.6 million balance is $10.1 million of restricted cash from the sale of the biologics business unit to Biotest. This cash is being held in escrow to support any potential indemnification claims made by Biotest, and the balance of this account will then be released to Nabi in April 2009. As of June 28, 2008, Biotest has not asserted any indemnification claims.

In February, we provided our initial 2008 financial guidance estimates for operating expenses in cash used in continuing operations. At that time, our expectations were a reduction in general and administrative expense of approximately 40% of 2008 when compared to 2007. We also estimated an increase in research and development expense 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 also expect the total operating expenses to decline slightly when compared to 2007.

We expected cash used by continuing operations to decline by approximately 15% compared to 2007 on the assumption that we would initiate a Phase III clinical trial from NicVAX in the second half of this year and that short-term interest rates remain stable. This guidance was based on the assumption that we would initiate NicVAX Phase III studies by year-end. We are on track with our financial plans through the first half of the year, and we are maintaining our initial guidance going forward.

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

(OPERATOR INSTRUCTIONS)

Your first question comes for the line of Richard Mansouri from the DCM Fund. Please proceed.

Hi, thank you, just a quick question. The strategic alternative process, you say it's progressing with interest from several parties. Is that interest across the board; i.e., are there people interested possibly in buying the whole company, are there people interested in partnering the compounds? Does it the run the gamut of interest?

Thank you, Richard, for the question. I'd just have to start with obviously there is -- we have a very, very promising pipeline, and we have a lot of interest in that pipeline.

As we stated in the beginning, the strategic alternatives process will be a dynamic process and it is a key corporate objective for 2008. But we also stated when we announced the process that we do not intend to disclose developments with respect to the process unless and until the Board of Directors has made a decision on a specific transaction and a definitive agreement has been executed. And as such, I really would like to limit the discussion related to that and just indicate that the strategic alternatives process is really progressing with several interesting parties.

No, that's good to hear. In terms of the programs, though, you said programs, plural, the implication is that there could be interest in NicVAX and also StaphVAX. Is that fair?

That is a fair statement, and that is absolutely accurate.

Okay, great.

Thanks, Richard.

Thank you.

(OPERATOR INSTRUCTIONS)

There are no further questions in queue. I would like to turn the call back over to management for closing remarks.

Thank you, operator. As you have heard today, we continue to make solid progress with our financial and clinical milestone goals. The interim data from the NicVAX immunogenicity study are very encouraging.

We continue to have discussions with interested parties regarding our strategic alternatives process and strategic partnership process. We are on schedule with the clinical milestones we established for 2008. We reduced debt by $31.6 million in the second quarter and our financial performance through the second quarter is in line with our expectations.

Our commitment to accomplish our corporate and clinical goals is resolute and focused on delivering value to Nabi shareholders and stakeholders. I hope you all agree that we have made great progress in the first half of this year, and I am confident in our ability to continue this positive momentum. Nabi management, its employees and our Board are fully committed to achieving these goals.

Thank you all for joining us today and thank you for (inaudible) support.

Thank you for your participation in today's conference, this concludes your presentation, you may now disconnect. Good day.