Vaxart Inc (VXRT) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter 2, 2011 Nabi Biopharmaceuticals earnings conference call. My name is Jennifer and I will be your operator for today. At this time, all participants are in listen-only mode, and later we will conduct 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.

Thank you, Jennifer, and good afternoon and thank you for joining us today. The news release announcing our second-quarter 2011 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 25, 2010 filed with the Securities and 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 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. 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. As you all know, on July 18, 2011, we announced that NicVAX did not meet its primary endpoint in the first of our 2 confirmatory Phase III clinical trials. A preliminary assessment of the trial data shows that subjects treated with NicVAX quit smoking at a similar rate of approximately 11% compared to subjects who received placebo. This was a very unexpected and surprising result given the encouraging data we saw in the Phase IIb proof-of-concept trial.

To recap the trial design, it was a double-blinded placebo-controlled trial of 1000 subjects. The primary endpoint of the study was the abstinence rate of 16 weeks ending at 12 months. Abstinence was evaluated by self-reported smoking status and cigarette consumption by logically verified by exhaled carbon monoxide. Secondary endpoints included the abstinence rate at various time intervals, safety and immunogenicity, and the effective of NicVAX on withdrawal symptoms, cigarette consumption, smoking satisfaction, and nicotine dependency.

The results of our secondary confirmatory Phase III clinical trial, which has a similar design and conduct as the first trial, are expected near the end of this year or the beginning of 2012. As we await the results of the second Phase III trial, we are in the process of assessing the reasons for the disappointing results in the first Phase III trial. I would like to clarify that we are still going through significant amount of data with our [controllants] and partners. However, our preliminary analysis revealed some observations that are worth mentioning.

Firstly, the vaccine was well-tolerated, confirming earlier observations from other clinical trials. We also confirmed and verified there were no operations error at any level. Moreover, the [lots] in the study performed as well as expected, and did indeed elicit a high level of anti-nicotine antibodies immune response, that is almost superimposable to the immune response seen with the same lot in a previous immunogenistic trial, as well as with the lot used in the Phase IIb trial.

Earlier analysis also showed the subjects on NicVAX who attained higher anti-nicotine antibodies were more likely to stop smoking long-term than subjects who attained low anti-nicotine antibodies, or those on placebo. This confirms our earlier finding from the Phase IIb trial. Additionally, we observed that cessation rate of subjects in the placebo arm increased towards the last a few months of the trial, coincidental with the primary endpoint measurement period. We have no explanation for this. Despite these early findings we still do not have a plausible explanation for the low efficacy seen in the trial.

Data from the second trial may provide clues that could help explain the results from the first trial. In addition to the data from the second Phase III trial, other ongoing clinical trials may also help us determine the viability of NicVAX as monotherapy or in combination with other smoking cessation from microtherapists. Meanwhile, our Board of Directors is considering all strategic alternative options to preserve shareholder value, while Management is working to further reduce our operational expenses.

Now let's review of the second quarter financial results. For the quarter ended June 25, 2011, the net loss from continuing operations was $4.6 million, or $0.11 per share, compared to a net loss of $3.4 million, or $0.08 per share, in the second quarter of 2010. Revenue for the second quarter was $3.7 million, this includes $3.2 million recognized from the upfront payments from both PentaStaph and NicVAX agreements with GSK, as well as $0.5 million for services provided to GSK under the PentaStaph and NicVAX agreement.

Total research and development expense was $6.5 million, compared to $6.5 million in 2010. The expenses in 2010 period were net of approximately $3.4 million of cost reimbursement through previously-ordered grants from the National Institute on Drug Abuse and the Department of Defense. There were no reimbursements from grants in the second quarter of 2011. General administrative expense was $1.4 million, compared to $1.2 million in 2010. We expect research and development expense to decline for the balance of this year compared to 2010 levels, and we expect general administration expense to decline slightly for the remainder of this year compared to 2010 levels.

Net cash used in operating activities from continuing operations in the first half of 2010 was $9 million, compared to net cash provided by operating activities of $41 million in 2010. This change is due to a reduction in payments seen from GSK compared to the first 6 months of 2010. We ended the quarter with cash, cash equivalents, and marketable securities totaling $102.3 million, compared to $110.7 million at December 25, 2010. The principal component of the decrease is attributed to cash used to meet our operating expense. That concludes our prepared remarks. Operator, let's open the call for questions.

(Operator Instructions) Joseph Schwartz, Leerink.

When do you think we will hear about the Board's conclusions? And what is the best way that they think to enhance shareholder value?

The answer to the second question is, I don't know until we actually have the discussion with the Board, Joe But to answer your first question we are working very hard to do that. We hope that we would have a better view towards the end of the year.

Then how much should we expect R&D expenses to decline following the conclusion of the second Phase III? Can you give us a sense of how much that represents of the total, what else is going on?

I'm not going to be able to give you an exact figure, Joe, but needless to say, once we conclude the second Phase III trial, expenses will decline substantially.

Are you just waiting for the second Phase III to announce a restructuring? Or is there any chance that we will hear about something along those lines before the second Phase III reports?

So if your question is are we working to reduce the expenses even as we await the second Phase III trial, the answer is absolutely. We started that almost the next day after we got the results. And if you mean by restructuring, reduction in workforce, we already actually have taken steps to do that. And we continue to evaluate every expense that the Company house with the objective to reduce its and eliminate it if it is not needed.

Can you remind us what aspects of the technology led to the GSK license deal? As opposed to the option for NicVAX, but the license, I believe it could potentially cover your carrier protein and/or linkers. But I am wondering if you can remind me there? And are those likely to be conserved in future generations that GSK might be developing?

That's a very good question. So GSK has the license for the second generation to use any of our IP, including the carrier protein. But that's at their option. The idea is to use the NicVAX hapten that is proprietary to Nabi and conjugate it with either the current carrier or a carrier of their choosing. But then to use adjuvant that they have, it's proprietary to GSK, use the adjuvants hopefully to enhance and hopefully to advance the production of higher immune response earlier after fewer injections. So in essence, the hapten is preserved, if you want, for the future generation. What they will not use in the future generation for sure is the alum adjuvant, and instead of the alum, which is used in NicVAX, they will use their own adjuvant. Thirdly, if they opt to change the carrier, they have the ability to do so and use one of their own carriers. Does that answer your question, Joe?

Yes, that's very helpful. Let me just ask 1 more and then I will let any others have a shot. Have you ever explored whether it would be acceptable to the FDA to design a trial which would have a run-in to select an enriched population of patients who mount an adequate antibody response to the vaccine and then just study them in the pivotal portion?

In essence, this is certainly not unheard of to have a select population, to treat them with a certain drug. To answer your question directly, the answer is yes. You can design a trial with these characteristics to enhance the efficacy. The trials we have don't have that feature, neither of those two trials have that feature in it. But in the future, can you do something like this? The answer is yes.

So the FDA was not against that concept?

We didn't explore that concept with the FDA, but I am telling you from my experience in observing other drugs that have been licensed in selected populations.

Jeffrey Cohen, Ladenburg Thalmann.

Raafat, I did not catch the exact number, cash at the end of the quarter was $102.4 million?

$102.3 million.

What was the share count?

42.8 million, 42.9 million.

Did you put out anything regarding repurchase during Q2 at all?

No. We did not repurchase anything in Q2.

Subsequent to Q2, any comments on repurchase?

We did not purchased any stock up until yesterday or today.

Any updates on Phoslyra, more recent than the FDA's approval?

We just received today, in fact, their Q2 earnings call. In one of the questions, they said that they expect to launch this week, but I have not seen anything beyond that in all honesty, Jeff. So I cannot tell you whether that is true or not.

Again, the second trial, the one-year date is, remind us, January, middle of January?

No. The one-year date is in November. And as I indicated, based on our experience from the first Phase III trial and how fast we were able to get the results, there is a possibility we get it towards the end of this year or early next year.

Jack Ripstein, Potrero Capital Research.

Am I mistaken, was there another $2.5 million that was going to come in on an FDA milestone for Phoslyra?

That was completely different indication for chronic kidney disease. We don't know if Fresenius is actually undertaking that activity or not. That was tied specifically to chronic (inaudible) use of PhosLo in chronic kidney disease.

And that's why it wasn't included in this press release, I take it?

Correct. We are not aware that Fresenius is pursuing that indication.

In terms of appetite for different outcomes for use of cash, and I appreciate there still has to be discussion with the Board, what on a using cash for acquisitions, where on a scale of 1 to 10 would that lie? 10 be favorable towards acquisition and 1 being against an acquisition.

I would not be able to answer that question at all really until we actually have the discussion with the Board, and we will make sure that shareholders know what the Board has decided when it comes. But until then it is really very tough for me to do any speculation as to what it looks like.

There are no further questions at this time.

Okay, well thank you all for joining us today and for 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.