Vaxart Inc (VXRT) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the second quarter 2009 Nabi Biopharmaceuticals earnings conference call. I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Gregory Fries, Manager of Investor Relations. Please proceed, sir.

Thank you, Leticia.

Good afternoon, and thank you for joining us today. As a reminder, the news release announcing our second quarter 2009 (sic) financial results will be available on our website 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 27th, 2008, and in our quarterly report on Form 10-Q for the quarter ended March 28th, 2009, both filed with the Securities and Exchange Commission. More information is also available on our website at www.nabi.com.

Now, I'd 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 the call.

Joining me for today's call is Dr. Paul Kessler, Senior Vice President of Clinical, Medical and Regulatory Affairs; Dr. Matthew Kalnik, Senior Vice President of Strategic Planning and Business Operations; and Mr. Ron Kocak, Controller and Chief Accounting Officer. Before we review the second quarter financial results, I'd like to review the developments over the past quarter and discuss a few other subjects of interest.

Earlier this afternoon, we announced the sale of PentaStaph and related assets to Glaxo-Smith Kline for a total consideration of up to $46 million. Under the terms of the agreement, Nabi will receive an initial cash payment of $20 million when the transaction closes, plus up to an additional $26 million associated with full milestone accomplishments. The milestones include initiation and completion of a phase I clinical trial for two of the antigens in collaboration with the U.S. Department of Defense, and then successful completion of materials and technology, transfer our program know-how to GSK. We anticipate completing these milestone tasks within the next 18 months.

GSK will reimburse us for the costs we incur in completing these milestones. The sale is subject to satisfaction of certain customer closing requirements by the buyer and seller prior to closing. Closing is expected before year-end 2009.

Following the sale, Nabi's board will review the potential uses of proceeds from this asset sale with a view to maximize shareholders' value. This transaction is a successful and significant step along the path towards the successful completion of our strategic alternatives process so as to maximize shareholders' value. We remain focused on securing a strategic partner for the continued development in commercialization of NicVAX, and we continue to see strong interest in this program from a number of parties.

In May, we disclosed that Biotest Pharmaceuticals Corporation filed indemnification claims for alleged breaches of representations and warrants made by Nabi in the asset purchase agreement associated with the sale of our Biologics business unit to Biotest in 2007. This effectively delayed the release of $10 million of escrowed funds scheduled for April 2009. We stated then that the claims were without merit and unsubstantiated and that we intended to vigorously defend against the claims.

As a result of our efforts, Biotest withdrew $50.4 million in claims in early June, which resulted in the release of $4.5 million of the escrowed funds to Nabi. The remaining $5.7 million claim is based on an alleged breach relating to local building permits for the Boca Raton manufacturing facility that was transferred to Biotest as part of the Biologics business unit. We hope to resolve this claim and have the remaining escrow funds released to us.

Another significant development during the quarter was the receipt of scientific advice from the European Medicines Agency, or EMEA, on NicVAX. This advice helps to insure that studies are designed and performed so that the likelihood of significant objections being raised during the market authorization process is minimized, thereby reducing regulatory risk for the program. This scientific advice confirms and supports our Phase III protocol agreed to earlier with the SFDA through its special protocol assessment, giving us the support and guidance of the world's two leading regulatory agencies.

As most of you know, we announced a $65 million share repurchase program in late 2007. We repurchased more than 900,000 shares during the second quarter and 1.1 million shares year-to-date. Since announcing this program, we have repurchased 11.1 million shares of common stock for a total of $40 million.

We also repurchased $10.4 million face value of our 2.875% convertible senior notes for $10.1 million during the quarter. As of June 27, 2009, we have approximately $6 million face value of debt remaining on our balance sheet compared to $42 million one year ago. We have repurchased a total of $106.4 million face value of our debt at a total discount of $10.6 million and reduced interest expense by $3.1 million on an annualized basis. Under the terms of the indenture, holders of these notes can require us to repurchase them at full par value in April 2010 or following the change of control. The repurchase of these notes was a prudent step that produced significant savings through the repurchase discount and the reduction in interest expense.

Now, let's review the second quarter financial results. For the second quarter, the net loss from continuing operations was $5.8 million or $0.11 per share compared to a net loss of $5.7 million or $0.11 per share for the same period in 2008. Including the results from discontinued operations, the second quarter 2009 net loss was $5.8 million or $0.11 per share compared to a net loss of $3.7 million or $0.07 per share in 2008.

General and Administrative expense was $2.4 million compared to $2.9 million in the second quarter of 2008, a decrease of 17% reflecting our continued efforts to reduce overall costs.

Research and Development expense was $3.4 million compared to $3.3 million in 2008. This slight increase is related to increased effort in preparation for the planned Phase III NicVAX trial, including manufacturing related activities. If we initiate the Phase III in 2009, R&D expense is expected to increase significantly over the remainder of 2009.

Net cash used in continuing operations for the six months ended June 27, 2009, was $12.8 million compared to $13.1 million for the same period in 2008. The decrease in cash utilization was driven by reduced G&A expenses, offset in part by increased R&D expenses.

We ended the quarter with cash, cash equivalents and marketable securities totaling $108.7 million. Not included in this balance is $5.7 million of restricted cash from the sale of the Biologics business unit to Biotest. This cash is being held in escrow pending resolution of the indemnification claim that I mentioned earlier.

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

(Operator Instructions). Your first question comes from the line of Stephen Dunn with Jesup and Lamont. Please proceed.

Good afternoon, Raafat, and congratulations on the PentaStaph sale.

Good afternoon, Steve. Thank you very much.

Just a couple questions on the milestones. The milestones you said were Phase I, I would assume that's the PVL antigen and the alpha toxin; is that correct?

That is correct.

Those are not actually in your full control though, are they? Is that a fair statement?

We are conducting the trial in cooperation with the U.S. Department of Defense, if that's what you mean, yes.

Well, I guess, are you at their mercy, I guess on their time clock?

We have full cooperation in that we actually share in everything related to even the timelines.

Okay, I was wondering if you could give a little bit more color on the EMEA discussions on the Phase III trial design. Were they in perfect congruence with your understanding with the U.S. regulators or were there some differences, if you can give me some color on that?

Sure, I'll give you a little bit obviously without disclosing all of the competitive intelligence related information, so they actually were in total congruence with the FDA. The differences were on which emphasis they put on the endpoints. We have all of the endpoints in the trial, both primary and secondary, and there was congruence on all of these endpoints. The difference is the emphasis, which agency emphasized which one more than the other, but there was no difference and we did not have to change the special protocol assessment that we got from the FDA at all.

So, but I would assume -- is it a safe assumption that continuous abstinence is the primary endpoint?

That's the indication that we are seeking, long term abstinence, yes.

All right. I guess, on the Phase III for NicVAX, what work, if any, do you have left to complete before you come to that where the next step is to now begin enrolling the IRBs and all that? What work, if any, do you have left to do?

So, Steve, obviously we have not given that detail and we don't give that detail, but what I can tell you is the general statements that the things that one undertake would be exactly like you said, the IRB approval, the site approvals, all of the contracts with the sites, the contracts with the CRO, the availability of the drug, all of that kind of stuff before you go and then, obviously, the approval of the FDA, which you already have.

And then I'm going to ask, I guess, the difficult question, but what is the go/no go with Nabi going on their own or waiting for a partner. I guess, if you can give some color on what is the decision-making, do you have a time limit? I guess, if you can give some color on how much, what constraints do you have before you finally say we're just going to do it ourselves?

So, just to make sure, what I will be able to tell you on this call is what kind of parameters that the Board of Directors is looking at. On the one hand, obviously, need to look at what is the best way to conduct the trial because if you have a partner, you would want the partner obviously to help with the design and with the conduct of the trial and the operations of the trial. The design is already set, so there is no question there, but the operations of it.

On the other hand obviously the Board is also looking at the competitive advantage that we have in terms of timing over our closest competitor, so these are some of the things we're looking at. Having said that, obviously I'm not at liberty to tell you a little bit more on that.

Okay, I have to ask. Anyway--

And I expected you to ask, and I'm sure you expected me to say what I said.

Anyway, thanks for taking my questions and congratulations on the Glaxo sale.

Thank you very much, Steve.

Okay.

Your next question comes from the line of Robert Chapman with Chapman Capital. Please proceed.

Could you give us some color on the height of the hurdle for the milestones that will result in an additional $26 million being paid between now and 18 months from now?

Thank you, Rob. I mean, certainly, the milestones, as we said, the initiation and completion of the Phase I clinical trial is one and two of the milestones, and in essence, it's like any other clinical trial you conduct. Being a Phase I, the hurdles are significantly less as you can imagine from a Phase II or a Phase III, but it's no different from any other clinical trial that one conducts. On the transfer of technology and materials, as these are very, very customary and very normal things in asset purchase sales or even licenses for that matter with the transfer technology, again, the hurdles are not different from any other transfer of technology from one company to the next.

So, it sounds like that the milestones are relatively -- and I emphasize it with relative -- easy to accomplish?

I didn't categorize it any which way. I'm just saying they are not different from any other milestones that you would find in a transaction like this.

Okay, the second thing I'd like to say is more of a comment than a question. There have been quite a few large holders that have been relatively patient over the last three years for accomplishments such as this and I can say that I've been somewhat dubious that things would occur and yet you pulled this thing off with an asset that I think without any argument is far less attractive versus NicVAX, so having read this Press Release and seeing you pull this off, at least from our standpoint, you have our support to continue diligently getting the highest price you can from either partner or sale for NicVAX and we'll try to be patient as you get this thing into the end zone, so thank you for your efforts.

Thank you.

(Operator Instructions). At this time, there are no further questions.

Thank you, Leticia. As you have heard today, we continue to make solid progress with our strategic alternatives, financial, and clinical milestone goals. We signed a definitive agreement for the sale of PentaStaph to GSK for a total consideration of up to $46 million. We continue to have discussions with interested parties regarding our strategic alternative process and strategic partnership process. We repurchased [900,000 million] shares of common stock during the quarter and we reduced our debt by $10.4 million in the second quarter. Thank you very much for joining us today, and thank you for your continued support.

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