Vaxart Inc (VXRT) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2011 Nabi Biopharmaceuticals Earnings Conference Call. My name is [Tahisha], and I will be your operator for today. (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 IR. Please proceed.

Thank you, [Tahisha], and good afternoon, and thank you for joining us today. The news release announcing our first quarter 2011 financial results is available on our website at www.nabi.com. Please understand 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 25, 2010, filed with the Securities & Exchange Commission. Additional information is available on our website, again at www.nabi.com

Now I'll turn the call over to Dr. Raafat Fahim, President and CEO of Nabi. Raafat?

Thank you, Greg, and thank you all for participating in the call. Joining me for today's call are Dr. Paul Kessler, SVP of Clinical, Medical and Regulatory Affairs, Dr. Matthew Kalnik, SVP of Strategic Planning and Business Operations, and Ron Kocak, Controller and Chief Accounting Officer.

Our two ongoing phase III NicVAX trials are progressing well, and we expect results from the first of these trials in the second half of this year. You may recall that we initiated the first phase III trial in November of 2009 and the second trial in March of 2010. Results from the second trial should come in the first half of 2012. Recruitment in both trials was complete on schedule, and we enrolled approximately 1,000 participants per trial. As a reminder, these trials are double-blinded, placebo-controlled studies.

We believe that we have undertaken all necessary steps to maximize the likelihood of success in the phase III trials. Thus, we optimized the dose regimen by adding a six-injection compared to the five-injection regimen used in the phase II proof of concept study. The advantage of a six-dose regimen was apparent from the results of a separate immunogenicity study conducted in 2008, which demonstrated that the additional injection generated significantly higher anti-nicotine antibody levels much earlier and in a greater percentage of subjects than in our previous phase IIB proof of concept trial.

We have aligned the target quit date in the phase III trials with the peak nicotine antibody levels to ensure that the study participants have sufficient antibody titers when instructed to quit.

The phase III trials are being conducted under a Special Protocol Assessment, or SPA agreement, with the FDA, and also in accordance with scientific advice that we received from the European Medicines agency. We are also employing standard of care counseling in the phase III trials that will be aligned with the target quit date and high antibody levels. Counseling to overcome the behavioral aspects of smoking is an important complement of smoking cessation therapies such as NicVAX, which treats the addiction component of smoking.

We recently announced that we have completed the final milestone for PentaStaph and have received the $5 million associated with the milestone from GSK. We are currently wrapping up our PentaStaph activity with GSK under the services agreement, and expect to complete all requested activities within the next couple of months.

We also recently learned that the FDA approved Fresenius's application for a new liquid formulation of PhosLo, called PhosLyra. Upon the first commercial sale of PhosLyra, Nabi's entitled to receive a $5 million milestone payment under the PhosLo sales agreement with Fresenius. The potential royalties are based on incremental sales of PhosLyra for a period of 10 years after the closing of the agreement on November 14, 2006. We do not have any insight on Fresenius's plan for commercial launch of PhosLyra, but the approval of the drug increases our opportunity to collect up to $72.5 million in milestones and royalty payments.

Now let's review the first quarter financial results. For the quarter ended March 26, 2011, net income from continuing operations was $2 million, or $0.05 per share, compared to net income of $5.5 million, or $0.11 per share, in the first quarter of 2010. Revenue for the first quarter was $9.2 million and reflects payment recognized under both the PentaStaph sale and the NicVAX optional license agreements with GSK. This includes $3.3 million recognized from the initial $21.5 million payment from PentaStaph and the $40 million upfront payment received from GSK at the close of the NicVAX optional license agreement, the $5 million for achieving the final performance milestone under the PentaStaph agreement, and $0.9 million for services to GSK under the NicVAX, as well as the PentaStaph agreements.

Revenue from the first quarter of 2010 was $13.7 million, consisting of $4.8 million recognized from the PentaStaph and NicVAX upfront payment, $8 million for completing PentaStaph milestones, and $0.9 million from transition services revenue.

General and administrative expenses was $1.3 million compared to $1.8 million in 2010, reflecting our expense reduction efforts. We expect our full year G&A expense to be comparable to the 2010 levels. Total research and development expense was $5.3 million compared to $5.9 million in 2009 and '10. This decrease is primarily due to a reduction in manufacturing related activities for NicVAX. For the periods ended March 26, 2011 and March 27, 2010, R&D expenses were reduced by government grant reimbursements of $0.3 million and $1.1 million respectively. We expect R&D expenses for 2011 will approximate the 2010 levels.

Net cash used in operating activities in the first quarter of 2011 was $8.6 million compared to net cash provided of $48.6 million in 2010. The principal reason for this decrease was the reduction in payments received from GSK in 2011 compared to 2010. These payments were associated with the NicVAX and PentaStaph agreements.

We ended the quarter with cash, cash equivalents and marketable securities totaling $102.5 million compared to $110.7 million at December [2005] -- 2010. This decrease in -- attributable primarily to net cash used in operations. I mentioned earlier that we achieved the final PentaStaph milestone and recognized the $5 million of revenue in the first quarter. We received the $5 million cash payment in April, so that amount is not reflected in the first quarter cash balance.

We did not repurchase any shares of our common stock during the first quarter of this year. Since the inception of share repurchase program in December of 2007, we have repurchased a total of 19.9 million shares of our common stock for $87.2 million at an average price of $4.39 per share. A plan balance of $27.8 million remain available for share repurchase.

In summary, we continue to make good progress with the NicVAX phase III trials while maintaining our financial discipline as we await final results from these trials.

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

Thank you. (Operator instructions.)

Jeffrey Cohen from C.K. Cooper.

Hello, hi, thanks for taking my questions.

Sure, Jeff. How are you doing?

I'm doing fine. Could you elaborate a little bit further, as I saw the press release on the $5 million from April 25, so why is it being tucked into Q1 as far as a receivable?

Sure, yes. We actually recognized the revenue at the time we complete the milestone and invoice [to] GSK. That's when we recognized the revenue for our agreement with our auditors. So we recognized it in quarter one, but we actually received the payment in quarter two.

Okay, so you recognize it when you invoiced it, and the payment will fall under Q2 on the balance sheet?

Correct. The cash payment, the actual cash, will show in Q2, but we recognized, for P&L purposes, in quarter one.

Got it. Can you comment if you purchase any shares since March 26?

We normally don't comment on purchases beyond the quarter, so I hope that answers the question.

Okay. So on the G&A line, it came in a little lighter than my expectation at 1.34, but you're stating that it could be -- 2011 could equal 2010, which was 6.2. So is that safe to say then that the balance of the three quarters will be higher, around the 1-6 to 1-7 level? And if so, is that as a result of ramping up the trials?

Well, I mean, as we mentioned, we expected the G&A to be equivalent. But when we say that, it's an approximate, so it's not exactly the same, Jeff. So it's not exactly dollar-for-dollar, but we expect them to be very close to each other.

Okay. And then on the R&D line, I was confused by your comment. Which portion for the quarter was a result of grants? Was it 1.1 or 0.3?

0.3.

0.3. So then I guess my question is, is this now, or does -- is the Company past the hump as far as spend for R&D for the trials? Should we see this decrease throughout the balance of 2011?

We should see, through the balance of 2011, equivalent to what we have seen with 2010. And the reason for that is that we have -- even though we are starting to ramp up the phase III trials, we have other trials ongoing for registration, for example we have a trial for -- what's called equivalence trial that is required by the FDA. So while we are wrapping up some trials, we are starting other trials.

Okay. And lastly, any comments recently from the trial with Chantix being concluded, being done from the Netherlands?

No, we have not. We have not had any public comments about how is that going, so this has not changed.

Okay, perfect. Thank you very much.

Thank you, Jeff.

Richard Mansouri from Mitch RD Asset Management.

Hi, thank you. Just a few questions. I guess, firstly, can you just help me understand a little bit better about the mechanism and timeline related to the GSK option exercise? If I remember correctly, they have a certain period to exercise the option. Is that after the first trial? Can you just refresh my memory, please?

Sure, Richard. So the way it works is that, based on a threshold level that has not been disclosed publicly, if we don't achieve that threshold level but still have a successful trial, GSK can wait till the second trial results to exercise the option. If that is the case, then they would have a chance to exercise the option after the second phase III trial and 25 days from the day we give them the results of that trial. If, on the other hand, in the first trial we achieve results above that threshold, that specific threshold, then they are obligated to exercise the option within 25 days after the first phase III trial when we give them the data. Does that explain it well?

Yes. No, no, so basically 25 -- in the latter scenario, if they don't exercise it within 25 days, you have the right to basically 100% of it. Is that fair to say?

That is fair to say, from the date we give them the results.

From the date you give them the results.

Correct.

Got it. Then secondly, just given the recent approval of PhosLyra, does that give the Company the ability to accelerate its share repurchase program?

We have not discussed that at the Board level, so I can't comment on that specifically, Richard. But it's certainly -- the approval of PhosLyra gives us a better chance of potential recognizing the remaining milestones and royalties from PhosLo.

Understood. Then lastly, do you have -- assuming the option is exercised, or assuming that the trial is successful, do you feel reasonably confident that Nabi as a corporate entity has the sufficient infrastructure to handle whatever is remaining? Or to put it another way, is it fair to say that the incremental expenses that Nabi as a corporate entity would incur would be relatively low, because I'm presuming that the vast, vast majority of those expenditures would be shouldered by GSK if you exercised the option. Is that correct?

Per the agreement, that is correct, yes.

Great. Okay, thanks a lot.

So yes, (inaudible) -- yes.

(Operator instructions.)

We have no more questions at this time.

Okay. Well, thank you very much, Operator, and thank you all for joining us today. Good evening.

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