Vaxart Inc (VXRT) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2008 Nabi Biopharmaceuticals earnings call. My name is Colby, 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. (OPERATOR INSTRUCTIONS). And as a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Gregory Fries, Manager of Investor Relations. Please proceed, sir.

Thank you Colby. Good afternoon, and thank you all for joining us today. As a reminder, the news release announcing our third quarter 2008 financial results is available on our website at www.nabi.com. I'd also like to remind that today's call may include forward-looking statements. These forward-looking statements and related risk factors are more fully disclosed and discussed in our annual report on Form 10-K for the fiscal year ended December 29, 2007, and in our quarterly report on Form 10Q four the quarter ended June 28, 2008, both filed with the Securities & Exchange Commission. More information is also available on our website at 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. Raafat?

Thank you, Greg, and thanks to all of you for participating in this call. Joining me for today's call is Dr. Paul Kessler, Senior Vice President of Clinical, Medical and Regulatory Affairs, and Mr. (Ron Cosack), Controller and Chief Accounting Officer. On this call, I'll be talking to you about our third quarter financial results. However, before we review the financial results, I would like to discuss a few other subjects.

The progress of our strategic alternatives process is obviously of great interest to our shareholders. As you know, this process is focused on, but not limited to, the sale or merger of the company or the outlicensing of our product candidates. We remain focused on this process and we continue to see interest in Nabi from several parties. This interest continues, despite the overall market turmoil in recent months.

As we previously indicated, we do not intend to discuss details until we have a definitive agreement and Nabi's Board of Directors authorizes such communication. Our primary objective is to maximize the value of our assets for the benefit of all of our shareholders through either a sale of merger of the company, or by developing strategic partnerships for our development pipeline products. As you may know, we recently announced the final results of the NicVAX Phase 2 schedule optimization study. The purpose of this study was to assess the antibody response and safety of a 400 microgram dose, six-dose immunization schedule, that included an additional dose administered at 12 weeks,compared to our 5-dose regimen, in a Phase 2B proof of concept trial. The data from this study provides clear evidence that the 400 micro gram, 6-dose immunization regimen results in significantly higher levels of antinicotene antibodies that can be generated faster, and in a higher percentage of subjects than observed in previous NicVAX studies.

The results show that more than 80% of subjects achieve the target antibody level at 14 weeks, compared to 50% in the Phase 2 proof of concept study at the same time point. Importantly, the six-dose schedule was well tolerated by the study participants, with an adverse event profile similar to what we have seen in previous NicVAX clinical studies.

Another note-worthy aspect of this study is the evaluation of NicVAX in the second cohort of subjects, using the vaccine lot that was manufactured for use in our planned Phase 3 clinical study. We wanted to be certain that we had a high quality vaccine lot for Phase 3. Although the results from this second cohort are not yet finalized, the interim results are virtually identical to those of the first cohort.

We have also confirmed that the antibodies produced by these two lots are functional through animal testing, illustrating that both lots effectively block nicotine from reaching the brain of rats. The planned Phase Phase 3 trial design follows the the dose regimen used in the schedule optimization Phase 2 study. The design will also align the target quit smoking date with peak anti-body levels and includes increased intensity of counseling, similar to other smoking cessation trials.. We believe that the ability to significantly increase antibody levels in a majority of immunized subject, increases the likelihood of success in this trial. It is noteworthy to indicate that our leadership position in bringing the first smoking cessation vaccine to market is a distinct competitive advantage.

We had a very productive meeting and a successful end of Phase 2 meeting with the FDA related to NicVAX. The FDA agreed with our Phase 3 trial design and encouraged us to subject a Special Protocol Assessment application, or SPA. An SPA represents an agreement with the FDA regarding the specific end points for the clinical trial. The advantage of having an SPA is that achieving the specified endpoints, typically leads to a successful regulatory outcome. We have submitted the application and anticipate the response from the FDA by year end. Assuming the FDA agrees with all aspects of the SPA application before year end, we could initiate the planned Phase 3 clinical trial later this year.

We continue to reduce our level of debt during the quarter. We repurchased 7 million R-value of our 2.875% convertible senior notes for $6.2 million, a discount of $800,000, resulting in $600,000 gain. As of September 27, 2008, we had $35 million par value of debt remaining on our balance sheet. We reduced the debt even further in October by repurchasing an additional $18.7 million par value of the notes at a discount of $2.1 million leaving a balance of $16.3 million, compared to $112.4 million one year ago.

Late in 2007, we announced a $65 million share repurchase program. Through the third quarter, 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 third quarter.

Now let's review the third quarter financial results. For the third quarter, the net loss from continuing operations was $4.3 million, or $0.08 per share, compared to a net loss of $10.4 million or $0.17 per share for the same period in 2007. The gain on retirement of debt I mentioned earlier was recorded as other income, and is part of continuing operations. Including the results from discontinued operations, the third quarter 2008 net loss was $1.7 million or $0.03 per share compared to a net loss of $15.9 million or $0.26 per share in 2007.

General and administrative expenses was $2.1 million, compared to $6.4 million in the third quarter of 2007, a decrease of 67%. This decrease reflects the reduced scale of operations after the sale of the Biologics business unit and our continued efforts to reduce overall infrastructure costs. Research and development expense was $3.4 million, compared to $4.5 million in 2007. This 25% decrease is primarily due to general cost reduction efforts as we focus on our lead product candidates, NicVAX and PentaStaph.

Net cash used in continuing operations for the nine months ended September 27, 2008, was $16 million, compared to $31.9 million for the 2007 period, or a 50% decrease year to date. We ended the quarter with cash and cash equivalents totaling $152.2 million and about $400,000 of this balance represents cash collected by us for sales of Nabi-HB that is due to Biotest. Biotest has informed us that it has received all necessary licenses and regulatory permits as of the close of the third quarter, so that in the future, we will no longer be receiving payments for Nabi-HB on behalf of Biotest. Not include in the $152.2 million balance is $10.6 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 be released to Nabi in April 2009. As of September 27, 2008, Biotest had not asserted any indemnification claims.

With nine months of fiscal 2008 behind us, we are revising our 2008 financial guidance for operating expenses and cash used in continuing operations. We now expect our 2008 general and administrative expenses to decrease by approximately 50%, compared to 2007 levels. This betters our previous guidance of 40% reduction in general and administrative expenses.

We are also revising our R&D projections for the current year to reflect the decrease of about 25%, compared to 2007 R&D expenses. We originally estimated an increase in research and development expenses of approximately 45%, compared to 2007. We now expect our 2008 cash used in operating activities will be about 50% of the 2007 level. Our original expectations for cash used in operating activities from continuing operations was a decrease of approximately 15% compared to 2007.

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

(OPERATOR INSTRUCTIONS). Your first question comes from the line of (Richard Mansouri) with BCM Funds, please proceed.

Hi, yes, thank you. Just a few questions. The cash in investments that you guys have, what exactly is it invested in? I.e., are you fairly secure about the underlying assets that you characterize as cash?

Yes, thank you very much, Richard for the question. Yes, all our cash is either in Treasury bills or in US government agencies, so they are all AAA and all highly rated and all high quality.

That's great. Then in terms of the number of shares outstanding, what share count can we use, and you had said that no shares were repurchased in the third quarter. Were any shares repurchased subsequent, or do you have the ability to repurchase shares subsequent?

Yes, we certainly have the ability to repurchase as you know the program is still running, and we did purchase a small amount after the close of the quarter.

So is there an share count, an up-to-date share count that you guys are using?

The share count as of the close of the quarter was 52.2 approximately, and after the purchase in 2000, after the end of the quarter the total share is approximately 51.9.

Okay. Excellent. And then lastly, regarding the Phase 3 trial design, it says here that the FDA agreed with the Phase 3 trial design protocol and encouraged Nabi to submit an SPA application. Just assuming for a second that the company didn't apply for an SPA, could you be in a position to start the Phase 3? Again, I understand that you want to proceed with the SPA, that you are proceeding with the SPA, but from my understanding, if the company wanted to start a Phase 3, would it be in a position to do so now?

Yes, the company could start a Phase 3. As I explained a few minutes earlier, it is beneficial to have an SPA and to have an agree with the FDA so that will be no confusion as to what will lead a successful license if we reach the end point. So that's the advantage. But the company is free to go ahead, because the FDA agreed with the protocol design, and if we didn't submit hypothetically the SPA, we could have initiated the Phase 3 after 30 days from submitting the protocol. We elected to submit an SPA, and that means, therefore, that we need to wait for their verdict on it.

Oh, no, no, no, I understand. No, that's great. Okay, I appreciate it. Thank you.

Thank you, Richard, for your questions.

(OPERATOR INSTRUCTIONS). Your next question comes from the line of (Martin Cane), private investor. Please proceed.

Good afternoon, Dr. Fahim.

Good afternoon, sir.

Just one quick question, the present economic conditions that are out there now, has that caused any potential buyers or partners to walk away from the table at this point?

As you can imagine, I cannot talk about specific, Martin. All that I can tell you is that you can imagine that the economic turmoil has caused several companies to be a bit cautious of how they proceed with various activities, but I can not be specific or give you any more details than the general statement.

Oh, okay. All right. But the interest -- there is still some strong interest out there for what Nabi has to offer?

As I mentioned in my prepared remarks, that there is interest in the company both in the entire company, in the whole company, as well as the specific products.

Okay. Thank you.

Thank you.

Your next question comes from the line of (Mark Komen), private investor. Please proceed.

Yes, hi. Could you give me a better idea on what you are projecting for your R&D cost for Phase 3 next year? I know you said you are looking at a25% reduction, but could you give me more in terms of what you think it's going to be for your R&D costs?

So, in essence we have not given any specifics, and I will not be able to give you specifics, and just to make sure that my statements were correctly interpreted, the 25% projection of forecast spend by the end of this year is relative to 2007. It doesn't talk about costs going forward beyond 2008.

Right.

And we have not talked, nor do we intend to talk specifically about costs of certain activities and certain aspects of the R&D.

Okay. Thank you very much.

Thank you.

At this time, there are no further questions in queue.

Okay. Well thank you, operator.

As you have heard today, we continue to make solid progress with our financial and clinical milestone goals. We continue to have discussions with interested parties regarding our strategic alternatives process and strategic partnership process. The data from NicVAX Immunogenicity study is very encouraging as we move towards the planned Phase 3 clinical trials. We held a successful NicVAX end of Phase 2 meeting with the FDA, submitted the Successful Protocol Assessment application, and are anticipating a response by the end of the year. We expect to fully achieve all of our clinical milestones we established for 2008, and we have improved our financial strengths by reducing our debt from $16.3 million from $112.4 million one year ago. I believe that we are making solid progress towards our goals and objectives, and I remain confident in our ability to continue on this positive track.

Nabi's management, it's employees, and our Board are fully committed to achieving these goals. Thank you very much for joining us today, and thank you for your continued support.

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