Vaxart Inc (VXRT) 2008 Q4 法說會逐字稿

Welcome to the fourth quarter and year-end 2008 Nabi Biopharmaceuticals financial results conference call. (Operator Instructions). I would like to turn the presentation to your host for today's call, Mr. Greg Fries, Manager of Investor Relations Mr.Fries please proceed.

Good afternoon, and thank you for joining us today. As a reminder, the news release announcing our fourth quarter and year-end 2008 financial results is available on our website at www.Nabi.com. I would 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 for the form 10K December 29, 2007 filed with the Securities and Exchange Commission. More information is also available at our website, 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 us for today's call is Ron Cochak, Controller and Chief Accounting Officer. We accomplished quite a lot during 2008. Our strategic alternative process remains the key point of focus for Nabi and we are committed to a successful outcome. We have significantly enhanced the value of our pipeline products in 2008 and are pleased with increased interest in our Company and its assets as a result. Additionally we have engaged the services of several advisors in our search for a partner or acquirer to advance the development of products and further enhance shareholder's value.

Our goals in 2008 for our development pipeline was to prudently derisk the programs while maintaining our strong financial position. After our successful Phase II B proof of concept study for NicVAX announced in 2008, we initiated and completed a successful Phase II dose and schedule optimization (inaudible) trial. The results of this study confirmed our belief that the peak antibody level could be elevated and accelerated with a revised dose regiment of six injections compared to five injections in the Phase II B proof of concept study. In addition the vast majority of subjects achieved what we believe is a an (inaudible) antibody threshold at the target quit date. We believe that the new dosing schedule and alignment of peak antibody level with target quit date have significantly enhanced the probability of clinical success of the Phase III trial.

On the regulatory side, we had a very successful end of Phase II meeting with the FDA. The FDA agreed with the design of the Phase III NicVAX study, indicated that our preclinical and manufacturing package was adequate to initiate a Phase III and more importantly, advised to submit for a special protocol assessment or SPA application. The SPA is an agreement with the FDA on the parameters of the Phase III trial, that, barring any unforeseen results typically leads to a regulatory outcome. We submitted the SPA and received the approval of the FDA by year-end. In our view, the successful SPA has reduced regulatory risk of the program.

With a new schedule established and SPA in place, NicVAX is well-positioned to enter Phase III. As such, we have secured our leadership position in bringing the first smoking cessation to market. We believe such a distinct competitive advantage enhances future commercial success and attractiveness of NicVAX. We are seeking a strategic partner acquired to further advance the development of and future commercialization of the vaccine.

For PentaStaph our goal is to advance the development of the two new antigen and enable the initiation of Phase I clinical trials in 2009. We reached two important agreements in 2008 that will significantly advance the development of PentaStaph and reduce the costs and development risks of the program. In September of 2008 we announced the collaborative efforts of the National Institute of Allergy and Infectious Disease to conduct pre-clinical toxicology evaluations of the two new antigens that we developed against two of the most (inaudible) toxins produced by the (inaudible) bacteria, namely (inaudible) or PVL and [alphatoxin]. These toxicology e valuations are in progress and we expect that the new antigens will be ready to enter the clinic in 2009.

In December, we entered into a cooperative research and development agreement with the US Department of Defense and the Henry Jackson Foundation to conduct a series of collaborative clinical trials for PentaStaph. With these agreements in place, we'll be able to advance the development of PentaStaph much further and faster than we could on our own. These trials include a Phase I evaluation of the safety of (inaudible) compounds, PVL and alphtoxin, a Phase II evaluation (Inaudible) polysaccharide types 5 and 8 and (inaudible) polysaccharide type 336. And finally a Phase III evaluation of the safety and (Inaudible) vaccine containing all five components given in two separate, simultaneous doses. Further clinical development of PentaStaph and its components beyond that contemplated by a collaboration with the MIAID and the US Department of Defense will require additional commercialization and development partners or commitment from existing partners.

We continue to reduced the level of our debt during the quarter. We repurchased $18.7 million par value of our 2.875% convertible senior notes for $16.6 million, a discount of $2.1 million that resulted in a $1.6 million gain. As of December 27, 2008, we have $16.3 million hard value of debt remaining on our balance sheets. Late in 2007, we announced $65 million share repurchase program. Since the inception of the program, we have repurchased 10.1 million shares of common stock at an average price of $3.66 per share for a total of $36.9 million. Leaving a planned balance of $28.1 million at December 27, 2008.

Now let's review the financial results. For the full year, our net loss from continuing operations was $15.0 million or $0.29 per share compared to a net loss of $24.5 million or $0.41 per share in 2007. Including our 2008 continuing operations results is a gain of $4 million from the debt repurchase that was recorded as other income. Including the results from discontinued operations, the 2008 net loss was $10.7 million or $0.20 per share compared to a net income of $47.1 million or $0.78 cents per share in 2007. Income from discontinued operations for 2008 includes $2.5 million mild sum proceeds associated with the sale in 2006 of PhosLo, a $2.2 million received in arbitration settlement with [Inhibitex] and $1.0 million related to the sale of [Aloprim] in 2007. The 2007 results included $79.7 million pretax gain from the sale of the [BioLogics] business unit.

For the quarter ended December 27, the net loss from continuing operations was $2.8 million or $0.05per share compared to a net gain of $9.7 million or $0.16 per share in the fourth quarter 2007. Including results from discontinued operations the net loss was $2.4 million or $0.05 per share compared to a net income of $78.7 million or $1.32 per share in 2007. The gain from the sale of the [biologics] business unit was recognized in the fourth quarter 2007.

For the full year, general and administrative expense was $12.4 million compared to $26.1 million in 2007, a decrease of 52%. 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. Total research and development expense was $12.6 million compared to $18.8 million in 2007. This 33% decrease is primarily attributed to a decrease in pre-clinic and other R&D expense of $11.2 million due to the sale of the [biologics] business unit. This reduction was offset in part by $5 million of increased spending for NicVAX and PentaStaph research.

Net cash used in continuing operations for 2008 was $22.8 million compared to $42.6 million for 2007 a 47% decrease. We ended the year with cash and cash equivalents and marketable securities totaling $130.3 million compared to $219.2 million at the end of 2007. The principal components of the decrease are payment of $51.6 million for the repurchase of debt and $20 million for common stock repurchases. Not included in the $130 million balance is $10.2 million of restricted cash from the sale of the [biologics] business unit 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 of 2009. As of today, Biotest has not asserted any indemnification claims.

In addition to filing our 2008, 10K today, we also filed an 8K disclosing that we have restated our 2007 and 2006 consolidated financial statements to correct for the misapplication of intraperiod income tax allocations between continuing and discontinuing operations. We want to assure you that these adjustments did not have any impact on our consolidated net income for any period, but resulted in reducing our loss from continuing operations while reducing income from discontinuing operations for these periods. Accordingly there, was no cumulative affect of the adjustment on our balance sheet as of December 29th, 2007 and the adjustment did not have any impact on our net cash flows for any period, our tax liability, or our net operating loss carry forwards. I would like to indicate that the original reporting was done after consulting with tax experts. That concludes our prepared remarks. Operator, let's open the call for questions.

Thank you. (Operator Instructions). And your first question will come from the line of Frank [Sipato]. Please proceed.

Hi. Hello?

Yes, you're here.

Yes, okay, I was asking about, I'm interested in how the Phase III for NicVAX will proceed from here?

You're asking a question, if I, if I read your question correctly, you mean whether we are going to be initiate a Phase III and when?

Yes.

We currently haven't made final decision on that and what, as we said all along, what we would like to do is initiate the Phase III with a partner. And beyond that, we haven't made any more statements on that.

Well, it's -- [pause in audio] -- there's been a lot of consolidation in the big Pharma, how come we can't find a partner?

As we indicated in our prepared statements, we actually have increased interest in the Company due to the recent successes that we have with the SPA and with the (inaudible) the study and beyond that, I can't answer the question.

Okay. I was just wondering because the shareholder value that you speak of, has only been toward those who have shorted the Company. The long, people who are long Nabi, have suffered terribly in the last year or so. Suffered terribly, but the short people who have shorted the Company have been very successful against you.

Yes obviously, what I, what I'm telling you is that we are trying--we are seeking a partner, that's our focus in the Company, that's what we've been doing and that's the only major focus for the Company. And we are continuing to add value for our programs to achieve that target.

Do you think you'll find a partner this year?

I am hoping we will find a partner.

Very good, sir.

Thank you for your question.

Thank you.

And your next question will come from the line of Richard Mansouri [Delamerica] Capital. Please proceed.

Hi, yes, thank you. Just a couple of questions, One, the Company's net operating losses, NOLs, do you have any approximation as to how much NOLs you have?

It was in the 10K. $128 million.

$128 million? Oh, okay. Great. Second-- Secondly, and some, someone just previously asked a question and you, said there's increased interest in the Company. Just so I understand that, when you say increased interest, is, can one interpret that to mean that now that you have the successful SPA in hand, I'm assuming that implies that the value that could be ascribed to the NicVAX compound might be afforded at a greater value by certain players if they do have an interest. Is that a fair characterization?

That is a fair characterization because we added value to the compound after doing that. But obviously you and I know Richard that at the end of the day, we'll evaluate each potential interested party, interest in the Company, based on that and the market will decide what it is. The concept itself that the SPA would increase the value is, is a correct one.

Okay, and then lastly just-- I didn't quite understand it, separate in away from NicVAX, you guys still, you do have the PentaStaph, which targets, currently a broad unmet medical need, are you considering partnering, that compound as well?

Absolutely. We've always said that. The agreements we have with the (inaudible) and the agreements that we have with the Department of Defense does not preclude us from getting a partner for PentaStaph and in fact there aren't partners interested in PentaStaph, period.

Got it, thank you.

Thank you, very much. Richard

Your next question will come from the line of Martin [Kane]. Please proceed.

Good afternoon.

Good afternoon, Martin.

You mentioned PentaStaph and the two other components that are in free pre-clinical trials.

Correct.

When do you anticipate them coming out of preclinical trials and when would you an anticipate a tentative Phase I start date?

What we said in our prepared statements is that they are currently being tested in preclinical. We anticipate during 2009 they'll be in a Phase I clinical trial.

Can you be a little more specific than sometime in 2009? Do you anticipate these two components being out of preclinicals by the middle of the year or throwing a dart and saying we anticipate them being out of preclinicals by sometime before the end of the year?

The reason we didn't pinpoint a date is simply that we have two factors we have to contend with. Number one is after the preclinical, we have to submit a [preIND] with the FDA and get their approval. It's not a well-defined period if they have comments on it and secondly that we are also in a partnership with the US Department of Defense and they have their own procedures and committees to review what we have before they start. That's why it's not only our own control of the clinical, in fact it will be conducted by the US Department of Defense, not by Nabi. It's under Nabi's name, but they are paying for the clinical operations part.

I understand that. I was just looking to, I know the FDA will, haven't they given you a fast track on (inaudible)?

They've given a fast track on the original StaphVAX. These two antigens were not in the original StaphVAX.

And well okay. So you really can't give me an answer there.

At this stage, it's very difficult, Martin, I apologize.

My second question is, what are you doing to enhance our shareholder value here? I've been a long-term holder at Nabi and as the first questioner started asking you we haven't seen any increase in shareholder value at all, in fact under, under your guidance and your predecessor Dr. Hudson uh, we've seen a continuing downturn in shareholder value.

I answer the question two ways. Our market is suffering these days, so that's number one. Number two, we have actually down quite a bit to enhance shareholder value. As I mentioned in my prepared script, we now have reduced the risk of the two programs quite significantly and actually, as I mentioned earlier, we are seeing the value of those reduction and risk in the fact that we have increased interest in the Company. So we actually have done that. These things will take a little bit of time and the unfortunate part is that the stock now is, is simply being evaluated by whether we have a partner yet or not. And the value of what we have added to the program will hopefully help us get there and we'll see the ultimate value. But as the company, as the programs have advanced, there is no doubt that we have added significant values to the program.

Well, sure isn't reflected in the stock price.

I totally agree with you, and I'm just as disappointed. You can imagine that I'm seriously disappointed by that.

And what else was I going to ask you? Okay I guess that'll do it for me.

Thank you, Martin, very much.

Okay.

Your next question will come from the line of Mark Conlin.

Hi, good afternoon, doctor.

Good afternoon, Mark.

I have two questions. Do you plan on aggressively repurchasing some stock seeing how you do have quite a bit of money in there? And the stock is obviously pretty low. Do you plan on being pretty aggressive? Seeing how we do have an opportunity to divide back the stock at the current levels? And secondly uh, I was under the impression that we did have enough cash to stock-base the rate. As we sit here and ponder, it seems like our competitors will catch up to us, thank you.

Thanks for two questions. Just to cover the first one about the share repurchase, we do have a program and the program has parameters Those parameters are registered and it's going automatically so I can't tell you anymore than that. The program has not ended. The program is continuing. That's the answer to that. As to the Phase III as I'm saying, we certainly have the SPA in place now, but there are a few things that we need to take care of and the decision by the Board hasn't been made to start the Phase III. I agree with you, time is of the essence. We're working very hard to get there, prudently, and to initiate the Phase III as rapidly as we can. We said we would like very much to have a partner to help us with the Phase III.

But again, it seems as though we have enough cash to at least initiate it and that might interest the partner.

It's a valid point and as I'm saying, we have not made any public statements about when or how we start it, but it's a very valid point and I appreciate you bringing it up.

Thank you, Doctor.

Thank you, Mark

Your next question will from from the line of Richard Casper with Casper Investments.

Hello, doctor, how are you?

Richard, how are you doing.

Doing well, my friend. Doctor can I assume there's big Pharma interest in the not NicVAX possible Phase III initiation?

I mean, I can't categorize how big or how small the company is, all I can tell you is we have interest from various companies.

Okay. Because I think that this is one of the most intriguing, I've been investing for 30, 40 years now, I think the nicotine vaccine, as well as your PentaStaph vaccines deserve a substantially higher price per share. It's just a matter of time. So congratulations on what you're doing and, and my question, basically is there a mid-to large-size biotechnology interest? Which I assume there is. Considering even the Obama Administration is talking about the seriousness of nicotine addiction and the number of deaths per year attributable to lung cancer and so on from smoking. I would assume that there would be some interest. If you could assure me of that, that would make my heart very happy.

Thank you form the words of encouragement number one, number two, I agree the value of our programs is not definitely reflected in the share price. So we agree with you on those. And as I mentioned, we have various partners interested and because of the recent achievements that we have, including the SPA, we have significant interest, additional significant interest. That's how I can categorize attrition.

That's good enough for me, doctor, congratulations, keep up the good work.

(Operator Instructions). Next question will come be Brad [Gough] with AU Consulting. Please proceed.

Similar to some of the other shareholders, obviously all of us want you to succeed but I guess my question is that along the lines of the strategic alternatives, is the time that it's taking in your mind due to the market turmoil that we've been experiencing, some of the combinations that are going on with some of the larger biotech companies or in your mind, are things progressing on a timetable? It seems that it's taking longer than you would have anticipated given our calls of last year.

Certainly,, it's taking longer than we anticipated. After you get into it, you discover quickly these things take a little longer than people anticipate. You always anticipate that it will take shorter than it does. It takes a long time and I can assure you and tell you this is a fact. So the second part of your question, has the market had an impact? In my view, there is no doubt there has been an impact. How big or small an impact I can't categorize it, but I can tell you that certainly companies are a lot more prudent, taking a lot more time to think about it, making sure that they invest wisely in things they are doing, which means they take a little bit of time.

And from the banking side, your representatives, given the turmoil on that side of the business, have you been able to keep the same bankers working on this transaction over the last year or so?

We did increase the advisors that are working with us on this. To hopefully speed up the process or get more exposure.

Okay. Well, again, as other holders have said, obviously it seems on one hand things are moving in the right direction, but if you just do a graph of the stock price, it's actually lower than it was at the beginning of last year, which is obviously disheartening, given what's going on. Obviously we hope that things come to fruition here rather shortly.

I hope so too, but just on the market and on the stock price, I'm sure you've also noticed that we are not alone in that space and not almost every company has had the same experience in recent months.

Absolutely, but obviously this is sort of, I'm not going to say one off situation, it's been a very difficult environment, but over an extended period of time, shareholders here haven't done particularly well and the valuation of stock was never at a lofty level to begin with. It seems to be overly discounting what's going on. It is what it is, and we'll have to move forward.

Brad, I couldn't agree with you more. Certainly the stock price doesn't reflect the value of the Company or the programs that we have that we think are more valuable than reflected now. Thank you for your question.

There are no further questions at this time. I would now like to turn the call to management for closing remarks.

Thank you. As you heard today, we continue to make solid progress with our product pipeline programs and improved our financial strength. We continue to have discussions with interested parties regarding our strategic alternatives process and have engaged several advisors in our search for partner or acquirer to advance the development of our products and further enhance shareholder value and are optimistic about our opportunities. We are positioned to initiate Phase III clinical trials following the agreement with the FDA, reached late last year on a special protocol assessment trial, for the trial. Thank you all for being with us.

Ladies and gentlemen, thank you for your participation in today's call. This is the conclusion to the presentation. You may now disconnect, and have a great day.