Vaxart Inc (VXRT) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the first quarter 2009 Nabi Biopharmaceuticals earnings conference call. I'll be your conference moderator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Mr. Greg Fries, Manager of Investor Relations. Please proceed.

Thanks, Stacy. Good afternoon and thank you all for joining us today. As a reminder, the news release announcing our first quarter 2009 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 on Form 10-K for the fiscal year ended December 27, 2008. More information is also available on our website which is, I mentioned is www.nabi.com. At this time would 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 on the call. Joining me for today's call is Dr. Paul Kessler, Senior Vice President of Clinical, Medical & Regulatory Affairs, and Mr. Ron Cochak, Corporate Controller and Chief Accounting Officer. Before we review our first quarter financial results, I would like to discuss a few other subjects. I know that many of you are interested in the progress of our strategic alternative process and may be concerned and frustrated about the length of time the process is taking. While I'm unable to speculate on when this process may conclude, I would like to tell you that there continues to be keen interest in the company and our products and we are pleased with the progress. I want to assure you that Nabi's management and Board of Directors, together with our advisors are committed to achieving the successful outcome and are doing everything possible to achieve that goal.

I would also like to tell you that there continues to be interest in the company and our products and we are pleased with the progress despite the fact that it's rather slow. Our objective is to realize the maximum value for our assets whether it is through licensing of our product and development, the sale or merger, a strategic partnership or joint ventures. We believe that being open to all of these options allow us to evaluate and select the best path forward. We have removed a substantial amount of risk from our lead development programs, and have, as a result, seen additional interest in NicVAX and PentaStaph. As we announced late last year, we reached agreement with the FDA on a special protocol assessment or SPA for NicVAX.

When an SPA is in place for a development product and the specified end points are achieved, that typically leads to a license for that product. We remain positioned to be the first smoking cessation vaccine to market as we continue to pursue a strategic partnership ideally prior to initiating the Phase III trials. There can be no doubt that NicVAX is a valuable asset, and I believe that we'll be able to advance the program so as to realize it's value. We have also reduced the risk of our PentaStaph development program through the collaborative agreements we have reached with the National Institutes of Allergy and Infectious Disease or NIAID and the Department of Defense.

During the period, we initiated preclinical toxicology testing for the new antigens of PentaStaph in collaboration with the NIAID. We expect these staffs would be concluded shortly and a phase 1 clinical trial initiated during 2009 for those two antigens under our cooperative research and development agreement with the Department of Defense. The support we receive from these organizations bolster our efforts to develop PentaStaph, reduces our development costs and significantly enhances the value of the program. During the first quarter we repurchased 127,742 shares of our common stock for a total of $411,000. Since the inception of this program, we have repurchased 10.2 million shares of common stock for a total of $37.3 million, leaving a balance of $27.7 million from the original authorized amount.

In addition, after the close of the financial quarter, we repurchased $10.3 million of our 2.875% senior convertible notes at a discount. This will be reflected in the second quarter financial statements. We now have just $6 million dollars par value of long-term debt on our balance sheet.

In the first quarter of 2009, we adopted the FASB staff position APB14-1 related to our accounting treatment for our convertible senior notes, which required retrospective application that resulted in financial adjustments for the period of 2005 to 2008. The adoption resulted in the adjustment of our financial statements from the years 2005 to 2008 with the effective initially reducing the carrying value of the debt component while increasing equity. At option of this new rule, also affectively increased the interest rate over the term of debt of the note which increased our non-cash interest expense. This does not affect our cash flow obligations regarding these notes in any way. We also disclosed in our news release and 10-Q that Biotest Pharmaceutical Corporation filed a notice of indemnification claims on March 31, 2009 under terms of our asset purchase agreement dated September 11th, 2007.

In their notice, Biotest estimates losses may reach approximately $66 million under certain circumstances. This action has affectively frozen our $10.2 million escrow account. Under the asset purchase agreement, our maximum liable for such indemnification claims is capped at 25% of the $185 million purchase price or about $46 million. Our agreement with Biotest requires that any disputes between us will be subject to binding arbitration. To date no arbitration proceeding has commenced. We intend to vigorously contest and defend against these claims and seek full release of the escrowed funds. Based on the information we have received to date from Biotest and as a consultation with our outside legal counsel, we believe that Biotest contract-related claim is without merit and that the permit-related claim is unsubstantiated.

Now let me review the first quarter financial results. For the first quarter the net loss from continuing operation was $7 million or $0.14 per share, compared to a net loss of $7.5 million or $0.14 per share in 2008. Including the results from discontinued operations, the first quarter 2009 net loss was $7 million or $0.14 per share, compared to a net loss of $7.2 million or $0.13 per share in 2008. General and administrative expense was $3.1 million, compared to $5.1 million in the first quarter of 2008, a decrease of 40%. This decrease reflects our continued efforts to reduce the overall infrastructure cost.

Research and development expense was $3.8 million compared to $3.2 million in 2008, reflecting increased activity. Net cash used in continuing operation was $6.5 million during the quarter, compared to $5.3 million in the first quarter of 2008. We ended the quarter with cash, cash equivalents, and marketable securities still at $123.3 million. In addition, there is $10.2 million of restricted cash that is related to the sale of Biologics Business to Biotest pharmaceuticals. This cash, as I mentioned is being held in escrow pending resolution of the indemnification claims recently filed by Biotest. That concludes our prepared remarks. Operator, let's open the call for questions.

(Operator Instructions) Your first question comes from the line of Martin Kane. Please proceed. Good afternoon, Dr.Fahim.

Good afternoon, sir.

On your appointment as CEO, you stated two of your goals were one, to enhance shareholder value, and two, to bring NicVAX to a successful Phase III conclusion either through a buyout, partnership or a go-it-alone Phase III trial. December of 2008, you issued two press releases, one concerning PentaStaph and government funding for Phase I and II trials and two, the special protocol agreement letter from the FDA concerning the end points of the Phase III NicVAX trial. Neither of which you followed up on. It seems to me your management style is one of inaction rather than action. Which leads me to ask myself, where are you taking this company? So, thank you, Martin for the question. I appreciate your openness with us. Certainly for the PentaStaph, as I mentioned, we actually did initiate the toxicology studies as we mentioned a few minutes ago. This toxicology study was a prelude then to the clinical studies. You cannot do the clinical studies without the toxicology. So we have advanced the PentaStaph that we indicated that we will advance it. So that's number one. For the NicVAX,, we are continuing to prepare for the Phase III trial and we are seeking the strategic partner to help us with the development of that NicVAX. That's what we said, that's what we continue to say.

A couple other questions, if I may. Can you give us some insight as to what is taking so long with finding a partner? Is it the data, the Phase II data on NicVAX is not that good, or is it possibly an asking price or is there just not as much interest as you have led us to believe?

So to answer your first comment first, about the Phase II results. The Phase II results are actually as good as one can see as a Phase II in the stage of development. So, we actually are seeing proof of concept, which was the main objective of that Phase II. So, I can assure you that the results, as indicated by key opinion leaders, they are very good. Now why is it taking so long? It's very difficult for me to speculate as to why it's taking so long. Certainly, we believe that this processes take a long time. Obviously we would like to, that these processes take shorter time. But sometimes they do take longer. And that's all that I can comment about. Why it's taking so long.

You can't give us any insight as to companies that seem to be interested, just walking away from the table or give us some clarity on this?

As we said from the beginning, we will obviously inform investors and shareholders when we have something at hand. It's very difficult to characterize this without jeopardizing the process. So, I think we have indicated that there is keen interest. We tell you there is keen interest. If there wasn't keen interest, I'm obligated to tell you that that is not the case, But as it stands today that's all that I can answer, Martin.

Well it doesn't give us a whole lot of in sight as to what is really going on now, does it?

And as I'm saying, it's obviously adding any more information than that jeopardizes the process.

Well, I must say, it's very disappointing.

Okay.

Thank you.

Thank you, Martin.

(Operator Instructions) Your next question comes from the line of Katan Paadwaker, please proceed.

Yes, I would like to know what is the cost of Phase III going to be for NicVAX, if you decide to go on your own?

Thanks for the question. We actually have not and do not talk about the cost of clinical trials. And certainly, we do not believe that it will be any more or any less than other similar clinical trials. But on the other hand, we do not give those figures.

Because if you decide to go on your own without a partner and if it happens to be (inaudible) setbacks, the stock is going to be worth pretty much zero, And the only reason I'm, like many others, are in the stock because we believe that Nabi will be successful in the strategic alternative process, but if I listen to the last six or seven conference calls it's pretty much a repeat of what you are saying and nothing is getting disclosed. The (inaudible )of what is happening in the negotiation and you need to give us more time so we are working on it and all of those things. And frankly, you're not even buying the back the shares at a depressed price which tells me the company is not confident in the solution of the process. You are buying back your debt, but you are not buying back the shares. [ Inaudible ] why is it not aggressive enough to buy it's own shares if it believes in the value of its own company?

So we have a program in place for the share buyback, and that program continues and that program is in place. And that's all that I can tell you about that. As it relates to our confidence in the program, I can assure you that the program is outstanding. NicVAX results from the Phase II results as well as the schedule optimization results is very, very good. And as far as we're concerned, we are saying that the process, yes, we admit the process is taking longer than people would like to see, but on the other hand, it is progressing and we see keen interest.

What can you tell about the (inaudible). That was $75 million outstanding when you sold that particular business. How much of that can be recovered in the next two years or is it over ten years, but you can give more insight into that?

So, what we can tell you is there remains to be approximately $7.5 million worth of milestones, and approximately $65 million worth of royalties to come to the year 2016. The milestones are related to a development program that for Sanyos ad and we are not privy to the development of those programs. So all that I can tell you is that we continue to wait for the development of those programs and when they are developed, we will reap the benefit of those milestones. And then subsequent to that we'll also get the royalties.

What about the company do landscape, you are not even initiating the Phase III, trial and I don't know how long you are going to be in this wait and see mode. And how long can you hold off before you lose your competitive advantage over the product, specifically with regard to the vaccine?

So that's a good question. And in essence, we still believe we have a good lead over our next competitor. And you may be aware that our next competitor was Citos and Citos had to reinitiate their Phase II with their formulation. And so we think we have a good lead over them.

So, you cannot tell how long you are going to wait if you do not get, let's say a partner, or any positive out come of your on going, how long you can wait before you decide to go on your own? That's a factor I would like to know, because I think for me, if company is going on its own, then I think it's too risky and I think based on your history. And you keep on saying that there is keen interest and increase interest and all of those things, but there is no indication of how many parties are involved, what stage are on going and you sound confident that there could be a positive outcome but you have to disclose more than that. I think we, the shareholders, are kept in dark and only the Board of Director and the company management is privy on what is happening in the company.

(multiple speakers) I'm sure you're aware this -- sorry, go ahead.

I listen to my other conference calls and they are all the same. And the company discloses more information. I think six or seven conference calls the same thing. Doesn't help us at all.

So, in essence I was just going to say that this is not unusual for strategic alternative processes, that you do not want to talk about the progress because that will jeopardize the process itself. So, and that's why we said, and we said it from the beginning when we started, that when we get results we'll disclose them. Before that, it will jeopardize the process and we certainly do not want to do that to make sure that we protect our shareholders. I hope you understand and I hope you agree.

I understand, but what I don't understand is why the same information repeats conference call after conference call without any full information disclosed. And if there is an interest in StaphVAX and NicVAX separately, you can at least show us something positive by sending (inaudible) to us. And right now I saw [ Inaudible ] that says Biotest is claiming for the losses. So, there is nothing positive coming out of the conference call. Only thing I can see is more negatives. And frankly, like many others, my patience is running thin and I'm going to probably see for some indication or I think I will liquidate my portion. For one, the company is not buying back shares. You bought a whole bunch of shares in the beginning of 2008 and since then you're buying debt. There is no share buyback. And if you're really unsuccessful in selling your affect, it should be worth much higher than what it is trading at. And just to show the confidence you should step in and buy the shares.

I appreciate very much your comments. I appreciate also your frustration. And we already talked about the share buyback and we already talked about with a we are disclosing. And I appreciate very much your concern and frustration. And I think I've been able to say what I can say at this stage. And I appreciate very much your questions though.

Thank you.

Thank you.

(Operator Instructions) With no further questions in the queue, I want to turn you back over to management for closing remarks.

Thank you Stacy. Although the strategic alternatives process is taking longer than we would all like to see, we are continuing to seek interest in our products and we are pleased with our progress. We are dedicated to accomplishing this key of corporate call in advancing our very promising product pipeline. I believe our efforts will lead to success for Nabi and our shareholder by delivering the catalyst that will ultimately drive the value. Again, thank you for joining us today and thank you for your continued support.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect and have a great day.