Vaxart Inc (VXRT) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 and year end 2009 Nabi Biopharmaceuticals earnings conference call. I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will be conducting a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Greg Fries, Manager of Investor Relations. Please proceed, sir.

Thank you, Derek. Good afternoon, and thank you for joining us today. As a reminder, the news release announcing our fourth quarter and full year 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 26, 2009 to be filed with the Securities and Exchange Commission. Additional information is available on our website at www.Nabi.com. I would now 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 me today is Dr. Paul Kessler, Senior Vice President, Clinical, Medical and Regulatory Affairs; Dr. Matthew Kalnik, Senior Vice President, Strategic Planning and Business Operations; and Mr. Ron Kocak, Controller and Chief Operating Officer.

2009 was a transformational year of significant accomplishments for Nabi. It was the combination of our deliberate strategy to enhance the value of our products in development so as to make them attractive to potential acquirers and partners. As such, we revamped the PentaStaph program by adding proprietary antigens we believe will improve the efficacy of the vaccine. We also initiated a valuable collaboration with the US military to conduct essential clinical trials for the vaccine, as well as the collaboration with the National Institute of Health to conduct preclinical toxicology for the new antigens. For NicVAX, we optimized the dosing schedule of immunization and succeeded in finalizing a special protocol assessment with the Food and Drug Administration, as well as scientific advice with EMEA, the European regulatory agency. We also partnered with NIDA, that's the National Institute on Drug Abuse and received a grant to partially fund the NicVAX clinical trials. We believe that these strategic value enhancing activities for PentaStaph and NicVAX were instrumental in our success in concluding transactions with the preeminent vaccine company in the world.

As a result of these important advances in the development programs, we successfully closed the sale of PentaStaph and related assets to GlaxoSmithkline in November of last year. We received a total cash payment of $21.5 million when the transaction closed. You may recall that an additional $26 million was contingent upon achieving four milestones. Additionally, GSK asked us to continue developing PentaStaph at its expense through the Phase I/II of the antigens in collaboration with the US military, demonstrating their confidence in our abilities. We initiated the trial on time in December 2009 and received the associated $5 million milestone. We have also completed the second milestone and received an $8 million payment earlier this year. There are two remaining milestones that we expect to achieve within the next 12 months that will generate another $13 million in payments to Nabi.

On March 5, 2010, we successfully closed an exclusive worldwide option and license agreement for NicVAX with GlaxoSmithkline. We have now locked in the initial $40 million non-refundable payment as a result of closing this transaction. As you may know, closing this agreement required the affirmative vote of a majority of outstanding shares of common stock entitled to vote at the special meeting of stockholders held on March 2, 2010. More than 73% of shares eligible to vote were cast in favor of this transaction. Of the shares actually voted, more than 99% voted in favor of the deal. We thank our shareholders for their overwhelming support of this agreement. We also received a $10 million grant from the National Institute on Drug Abuse that will help fund the first of the two Phase III trials that are required for licensure.

In November 2010 -- '09, we announced the initiation of the first NicVAX Phase III clinical trial. Recruiting efforts for this study are progressing well and on schedule, and we expect to complete subject accrual this year and have the results in the second half of 2011. We also expect to initiate the second Phase III trial within the next few months.

It is worth noting that we are conducting these trials under a special protocol assessment, or SVA, with the FDA in accordance with scientific -- and in accordance with scientific advice that we received from the European Medicines Agency that confirms and supports the trial protocol. The FDA, along with the scientific advisory reduces our regulatory risk for the NicVAX program. We have already transferred the commercial manufacturing technology of NicVAX to long term contract manufacturing organizations and are on track to manufacture the commercial consistency lots of NicVAX and clinically test them as required by the regulatory agencies to support the license application. As a result of these successful agreements with GSK, our cash assets are expected to grow further. Consequently, the board is actively assessing the most appropriate means of returning cash to shareholders. Now let's review the financial results.

For the full year, our net loss from continuing operations was $18.7 million, or $0.37 per share compared to a net loss of $23 million, or $0.44 per share in 2008. Including the results from discontinued operations, the 2008 net loss was $18.7 million, or $0.36 per share. Income from discontinued operations for 2008 primarily includes $2.5 million milestone proceeds associated with the sale of PhosLo in 2006 and $2.2 million received in an arbitration settlement with Inhibitex. For the quarter ended December 26, 2009, net income from continuing operations was $1.1 million, or $0.02 per share compared to a net loss of $5.1 million, or $0.10 per share in the fourth quarter of 2008. Including results from discontinued operations, the 2008 net loss was $4.7 million, or $0.09 per share.

Revenue for 2009 was $10.5 million, which reflects payments recognized under the PentaStaph agreement with GSK. This includes $3.1 million from the initial $21.5 million payment received from GSK, which is being recognized as revenue ratably over the term of the transition service agreement currently expected to be 14 months. We also recognized $5 million of revenue in 2009 upon the successful achievement of a performance milestone and $2.4 million related to our services provided under this agreement. We expect our revenue will increase in 2010 as a result of closing the NicVAX agreement, resulting in $40 million cash which we expect to receive in March 2010, additional revenue from the NIDA grant, reimbursement of costs of service to GSK and possibly the two remaining PentaStaph milestones.

For the full year, general and administrative expense was $10 million compared to $12.4 million in 2008, a decrease of approximately 20%. This decrease reflects our continued effort to reduce overall costs and a reduction in share base compensation expense, partially offset by higher legal expense associated with the strategic alternative process. Total research and development expense was $16.5 million compared to $12.6 million in 2008. This increase is primarily attributable to increased activities associated with the initiation of the NicVAX Phase III trial, including manufacturing-related activities. We expect research and development expenses to increase in 2010, primarily as a result of continuing the Phase III -- first Phase III trial, in shaping the second Phase III trial of NicVAX and the NicVAX manufacturing activities and associated trials to prepare for commercial production. Net cash provided by operating activities for 2009 were $6.2 million compared to a net cash use of $18.9 million for 2008. Cash used in operating activities from continuing operations was $3.8 million in 2009 compared to $22.8 million in 2008. This decrease is primarily due to the receipt of $21.5 million at the close of the PentaStaph transaction.

We ended the year with cash, cash equivalents and marketable securities totaling $119 million compared to $130.3 million at the end of 2008. The principal components of the decrease were payments of $10.1 million for the repurchase of debt and $7.9 million for common stock repurchases settled in 2009. This was partially offset by cash provided by operating activities.

In fiscal 2009, we repurchased 2 million shares of our common stock for $8.1 million at an average price of $3.94 per share. Thus far in 2010, we have repurchased an additional 1.8 million shares for $9.2 million. Since the inception of this share repurchase program in December 2007, we have repurchased a total of 13.9 million shares of our common stock for $54.1 million at an average of $3.89 per share. Approximately $10.9 million of the original authorized $65 million remains available from the original program.

To summarize, 2009 was a transformational year for Nabi, and we are off to a great start in 2010. We have emerged from the strategic alternative process tightly focused, financially stronger and with an ideal partner for NicVAX to help us unlock its potential. We have already returned $54 million of equity to shareholders in the form of stock repurchases and retired approximately $106 million of debt. I and the entire Nabi team are excited and fully focused on executing the successful Phase III NicVAX program, which we believe is the remaining key to fully unlock shareholders' value. That concludes our prepared remarks. Operator, let's open the

(Operator Instructions) And the first question comes from the line of Jeffrey Cohen with CK Cooper. Please proceed, sir.

Hi, good morning Raffat. Thank you for taking my call.

Good morning, Jeff. How are you doing? Or good afternoon, actually.

I'm doing just fine. Could you -- I have a number of questions, so let me just go through them. What is the end date on the PentaStaph agreement, the service agreement? You said expected to be complete in 14 months?

Correct, yes. There is no end date. The end date is actually at the end of the last activity that we have with them. We expect that this activity will be finished in the next 12 months.

Okay, so where is the balance of the money part, if you recognize just $10.5 million as revenue?

You're talking about the revenue recognition. This is just the accounting. So in essence, it is ratable over the next 12 months. The remaining part is ratable over the next 12 months.

Okay. So you're not counting that balance as cash at the moment?

No, no, it's counted as cash, but it's not counted as revenue.

Okay.

It's deferred revenue.

Okay. Could you perhaps talk about G&A forward? It looks like this quarter was somewhat lighter than Q3, and how do you perceive that looking through 2010?

Well, as we mentioned in the prepared remarks, we expect 2010 would be similar to 2009 in terms of G&A. We expect that we have realized much of the cost savings that we have focused on in the past couple of years. So we expect it to be very similar to 2009, Jeff.

Okay, and then as it relates to R&D, I'm looking at -- I'm trying to narrow down my costs per enrollee in the trial and currently, I've got probably $30,000 per enrollee. Could I get, perhaps your thoughts on what you expect on a burn rate or a cost per enrollee forward?

We have not given any guidance, Jeff, on actually a burn rate, but as we explained, we expect it to increase. We will have two Phase III clinical trials ongoing, each one 1,000 patients or 1,000 subjects, as well as the manufacturing activity and associated clinical trials. We said it will increase, but we have not given any guidance as to what it looks like.

Okay, and I think my last question at the moment is, could you further define what you're saying is service revenue and cost of service? And how that differentiates from what you previously have been discussing, which is grants, licensing milestones, royalties and then your expenses just broken down into G&A and R&D?

So, so the services are services that we are providing to GSK. That is very, very specific, because we have a certain activities that we, by our transition service agreement, we are required to do. So they -- we give them invoices for the expenses we have incurred, and they pay us against those invoices. This is what the service revenue is, in essence. The cost of that service is obviously costs that we incur internally to conduct the service that they require of us. Does that answer your question?

Yes, that's perfect. That's it for now. Thank you very much.

Thank you, Jeff. I appreciate your call.

(Operator Instructions) I'm showing no further questions at this time. I would like to turn the call back over to Dr. Raafat Fahim, CEO, for closing remarks.

Thank you, operator, and thank you all for joining us today and for your continued support of Nabi.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.