Vaxart Inc (VXRT) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, welcome to the second quarter 2010 Nabi Biopharmaceuticals earnings conference call. My name is Keesha and I will be your operator for today. (Operator Instructions). I would now like to hand the call over to Mr. Greg Fries, Manager of Investor Relations. Please proceed.

Good afternoon, and thank you for joining us today. The news release announcing our second quarter 2010 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 discussed in our annual report on Form 10-K for the fiscal year ended December 26, 2009 filed with the Securities and Exchange Commission.

Additional information is available on our website, as I said at www.nabi.com. Now, I 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 in the call. Joining me for today's call is Dr. Matthew Kalnik, Senior Vice President, Strategic Planning and Business Operations, and Mr. Ron Kocak, Controller and Chief Accounting Officer.

The second quarter marks the first full quarter of running both Phase III NicVAX trials. We recently announced we completed enrollment in the first trial that was initiated in November of last year, and the final results from that trial are expected in the second half of 2011.

Enrollment in the second Phase III trial which was initiated in March of 2010, is progressing on schedule with the results anticipated in early 2012. I'm very pleased with the progress we are making in these pivotal trials. We continued our common stock repurchase plan during the second quarter.

We repurchased 4.8 million shares for $27.2 million which translates to an average price of $5.63 per share. Through the first six months of 2010, we repurchased 6.7 million shares of our common stock for $36.4 million at an average price of $5.47 per share.

In addition, we also repurchased 563,194 shares at $3.1 million so far in the third quarter through July 30, at an average price of $5.46 per share.

Since the inception of the share repurchase program in December of 2007, we have repurchased a total of 19.3 million shares of our common stock for $84.4 million at an average price of $4.36 per share, reducing the number of shares outstanding by 31%.

As of July 30, there were approximately 43 million shares of Nabi common stock outstanding and the balance of approximately $30.6 million remains available for share repurchase. Now, let's review the second quarter financial results.

For the quarter ended June 26, 2010, the net loss from continuing operations was $3.4 million or $0.08 per share compared to a net loss of $5.8 million or $0.11 per share in the second quarter of 2009.

Revenue for the second quarter was $4.8 million, this includes $3.9 million recognized from the upfront payments for both the PentaStaph sale and the NicVAX option and license agreement with GSK as well as $0.9 million for the services provided to GSK under the PentaStaph transition services agreement.

Revenue for the upfront payment is being recognized ratably over the expected term of the joint steering committee's created under each of the agreements. General and administrative expenses was $1.2 million compared to $2.4 million in 2009, reflecting our continuing efforts to reduce expenses and an allocation of a portion of these costs to the cost of services associated with the PentaStaph transition services agreement. Total research and development expense was $6.5 million compared to $3.4 million in 2009.

This increase is primarily attributable to increased activities associated with the NicVAX phase III trials as well as the NicVAX manufacturing related activities and is net of approximately $3.4 million of cost reimbursement through previously awarded grants from the national institute on drug abuse and the Department of Defense.

We expect R&D expenses will continue to increase in 2010. Net cash provided by operating activities from continuing operations in the first half of 2010 was $41 million compared to a net cash use of $12.8 million in 2009. We ended the quarter with cash, cash equivalents and marketable securities totaling $118 million compared to $119 million at December 24, 2009.

The principal components of the decrease were $35.8 million to settle common stock repurchases, $6.1 million to repurchase the last of our outstanding senior convertible notes, and our year-to-date operating expenses.

Partially offsetting these amounts were payments of $56.3 million received from GSK associated with the NicVAX and PentaStaph agreements. That concludes our prepared remarks. Operator, let's open the call for questions.

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

Good afternoon and thank you for taking my call. I guess I have two questions if we could walk through firstly the G&A expense for the quarter, which seemed a little low to me in a good way at 1.2. Do you expect that will stabilize through the balance of the year or do you expect that to go back up toward the $2 million or $2.1 million level?

No, we expect that it will -- certainly it will fluctuate a little bit as you can expect, Jeff, as is always the case. But we expect it to be lower than 2009 in balance.

Okay. And then I guess the harder one is on R&D, I had previously thought that R&D would peak around Q2 at probably, arguably higher levels. It looks like it is lower than I expected at $6.5 million and you stated that you think it could or would go higher throughout Q3 and Q4. Any additional color on Q3, Q4 perhaps next year on R&D?

All I can tell you, as you can imagine, as you recruit for these clinical trials, you continue to pay as you recruit individuals and subjects in the trial. So, quarter two is just the start, if you want, of the second Phase III trial. It was -- we had obviously a lot of subjects enrolled in the first trial but significantly fewer subjects in the second trial, clearly because we started the second trial, in March, in the middle of March or so. So it is not peaked but it gives, certainly an indication of running the Phase II -- the two Phase III trials simultaneously. So that is the reason why we anticipate as we go into the year, the balance of 2010 that we will continue to increase because you increase enrollment in both in the trials.

Okay. And when will you anticipate that would potentially actually start to decrease? Would that be the beginning of 2011?

I would imagine as the clinical trials taper off, it is very difficult to give you an exact timing, but I would imagine towards the second and third quarter of 2011, as we get near to finishing the trials then it starts to taper and would go down after that.

Okay. And last quick question, have you heard anything more from Fresenius on the reformulation of PhosLo?

What we know again, is the same news that we heard earlier that they intend to file, but we don't know whether they filed already or not, but they had intentions to file in 2010. So, we should hear something, within the next few months, I would imagine, Jeff.

Thank you very much.

Thanks, Jeff.

The next question from the line of [Pat Hamot] with RRH. Please proceed.

Hi, guys.

Hi, Pat.

I've got a couple of questions for you. Are you able to give any thoughts on cash position end of this year if you don't buy back more stock or something, a way to look at the business at some milestone? End of the year might not be the way to do it or maybe do you have any thoughts on that and how you are managing the business philosophically, in terms of cash usages besides trying to use as little as possible?

Just your last comment in essence, enunciated our philosophy, to use as little as possible in things that don't relate to the clinical trials. We are clearly spending what needs to be spent in the clinical trials, but outside of that as you have seen that we try very hard to reduce the G&A. It is very difficult to give you any form of prediction for cash at the end of the year because as you correctly stated, we have the expenses, operating expenses that we said will increase as the year go by and in addition the share repurchase which is very difficult to give you any estimate of what that should look like.

Okay.

Sorry I'm not giving you much towards the question you asked, but I hope you understand that it is very difficult for us to give you that position.

Right. And just to be clear, I didn't have high expectations of an answer, but I was just wondering philosophically, the thought is we should have in the third quarter of 2011, we should have a cash position of X barring stock buybacks. Is there any goal by the board that has been articulated at all on what your cash position in the future should be and how to look at cash usage for R&D and more likely the more discretionary item is stock buybacks?

Certainly, we have not been giving guidance related to that at all, no.

Okay. Then I joined a little bit late, maybe very late. The -- for lack of a better word, second generation or alternative NicVAX programs with GSK, do you have any light to shed on that? How you guys are managing that process, whether that has used up any of our R&D money this quarter or are you anticipated using any R&D money in the future? How do you like how the program is going on the second generation stuff?

On the second generation, we pay nothing. In fact if we conduct any service to GSK they reimburse us for it. We don't pay anything so none of the shareholders money would go into the second generation. That is to answer your question, bluntly. The second part important for you to know, is that GSK is obligated to initiate the second generation as per our agreement. So it is not, if they wish, it is they have to initiate the future generation, what we are calling future generation nicotine vaccine. That is part of the joint steering committee that we have jointly, so we have full visibility because they need our help in many cases not only for material but also for advice in conducting the research and development for that. We have full visibility through the joint steering committee. Does that answer your question well, Pat.

And just to ask more specifically and if you want to answer if you can or not. Was there any reimbursable expense in this quarter and do you anticipate any in next quarter?

For the future generation specifically?

Yes.

No, there hasn't been for this quarter.

All right. Super. Thank you very much.

You're welcome.

Your next question comes from the line of Richard Mansouri with DellaCamera Capital.

Just wanted to ask about PhosLo, you mentioned that there might be filings that we don't know definitively about time tables. Are there any specific milestone payments associated with either an NDA submission and/or acceptance? Do you know anything about that?

For approval, yes, I know very well. For approval there is a $5 million milestone if that form of PhosLo, is just a liquid PhosLo, approved we get $5 million milestone and then right after that we start getting royalty based on sales above a certain threshold.

$5 million on approval.

$5 million milestone, yes.

And can you refresh my memory is there an aggregate dollar amount that you would be entitled to, is that something in the $70 million vicinity?

Approximately, yes. $65 million, I think it is.

Understood. And then just separately you make reference to the PentaStaph milestones. Do you expect to complete those and get the $13 million by the end of the year, is that in one lump sum or is that expected to be spread out among specific, discrete events?

Two things. We actually didn't say by the end of the year. We said within the next nine months or so. We expect one of those milestones to be completed this year, but the second milestone may not be completed until next year, and that is not in a lump sum obviously because you have it in two different milestones. One for $8 million and one for $5 million.

Understood. Great. Okay. Thank you.

Thank you.

There are no further questions in queue. I would now like to turn the call back over to Mr. Raafat Fahim for any closing remarks.

In conclusion we are pleased with the progress of the NicVAX Phase III trials thus far and believe we are on track with our anticipated result stage for both studies. We have repurchased a significant number of outstanding shares and have maintained our solid financial control which increases shareholders value. Thank you all for joining us today and for your continued support.

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