Vaxart Inc (VXRT) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 Nabi Biopharmaceuticals earnings conference call. May name is Derrick and I will be your operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Greg Fries, Manager of Investor Relations.

Thank you, Derrick. Good afternoon, and thank you for joining us today. The news release announcing our third quarter 2001 financial results is available on our website at www.nabi.com.

I would also like to remind that you 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, and our quarterly report on form 10-Q for the quarter ended June 25, 2011, both filed with the Securities and Exchange Commission. Additional information is available, again, on our company website at www.nabi.com.

Now, I will 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 are 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.

Early in the quarter, we announced that NicVAX did not meet its primary end point in the first of two Phase III clinical trials. Our analysis confirmed that there were no errors in the conduct of the trial, and that the vaccine lot performed as expected. It elicited strong anti-nicotine antibody immune response that is almost identical to that seen with the same lot in a previous [immusinisitic] trial, as well as with the lot used in the Phase 2B proof of concept clinical trial.

The results of our second confirmatory Phase III clinical trial, which has a similar design to the first trial, is expected in the next few weeks. In the first Phase III trial, subjects in the NicVAX arm who obtained higher levels of anti-nicotine antibodies were more likely to stop smoking long term than subjects who had obtained low anti-nicotine antibodies or those on placebo. This supports our earlier finding from the Phase 2B proof of concept trial.

We still do not have a good understanding of the reasons for the unexpected overall results of the study, but believe that an even higher immune response earlier in the treatment regimen may be needed to help smokers quit. Data from the second Phase III trial, as well as from the ongoing Dutch trial in combination with Chantix, may provide further clues that could help explain the results from the first trial.

As previously indicated, our Board of Directors is assessing strategic alternative options to preserve shareholder value and will finalize next steps after we've had a chance to review the results from the second Phase III trial. Simultaneously, Management is working to further reduce operation expenses and preserve cash.

Now, let's review the results of the third quarter financials. For the quarter ended September 24, 2011, the net loss from continuing operations was $2.9 million, or $0.07 per share, compared to the net income of $5.1 million, or $0.12 per share in the third quarter of 2011. We also had $3 million, or $0.07 per share, in net income from discontinued operations for the quarter ended September 24, 2011.

This $3 million of income from discontinued operations relates to the $5 million milestone payment we received related to the first commercial sale of a new liquid formulation from the PhosLo agreement, which is offset by a $2 million income tax provision. This tax provision was offset by an identical tax benefit in continuing operations, though the overall tax provision is 0.

Revenue from the third quarter of 2011 was $1.1 million, including $0.6 million of deferred revenue amortization from the NicVAX agreement, and $0.5 million for services under the PentaStaph and NicVAX agreements. Revenue from the upfront payment of the NicVAX agreement is being recognized rateably over the expected term of a joint steering committee created under the agreement. The outcome payment from the PentaStaph agreement was fully recognized as of the second quarter of 2011.

Total attrition development expenses were $4.3 million for the third quarter of 2011, compared to $6.8 million for the comparable 2010 period. This decrease primarily reflects decreased costs after completion of the first NicVAX Phase III clinical trial in July of 2011. We expect R&D expenses over the remainder of 2011 to continue to decline relative to the third quarter costs, as we have completed a large Phase III trial and we are winding down the second Phase III trial.

General and administrative expenses were $1.2 million, compared to $1.4 million in 2010. We expect that our fourth quarter general administrative expenses will decline slightly compared to the third quarter as Management intensifies its effort to reduce such costs, including work force reductions as appropriate.

Net cash used in operating activities in the first nine months of 2011 was $14.5 million, compared to net cash provided by operating activities of $41.5 million, in the first 9 months of 2010. This change is primarily the result of a reduction in the amount of payment received from GSK in the latest 9 months period, compared to the 2010 period.

We ended the quarter with cash, cash equivalents, and marketable securities totaling $102 million, compared to $110.7 million as at December 25, 2010. The decrease is primarily the result of our net cash used in operations, offset in part by net cash provided from discontinued operations.

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

(Operator Instructions)

James Lee, Potrero Capital.

Hi. With regards to cash, what is the Board currently thinking in terms -- which way is it leaning towards use of cash? Is it to make an acquisition, or is it more of, perhaps, winding down the company?

Well, as I mentioned, actually, we're looking at all strategic alternatives, and it is just a matter of time now while the Board is evaluating all these strategic alternatives. And, once we get the results from the second Phase III clinical trial we will indicate the -- what directions strategic alternatives will take.

And then the second trial, you said you should expect the end results in the next few weeks, so would you guys announce the results shortly after that? That would be right before the year-end.

We will announce the results when we get the results, yes. That's the expectation.

Okay. And, then in terms of OpEx, it looks like Q4 was down. Assuming you guys are continuing in Q1, would that just drop off -- would R&D basically go to zero by Q1?

Well zero is -- you may or may not realize that we still have a clinical trial ongoing in the Netherlands in combination with Chantix, so the results -- the expected expenses for both G&A and R&D will decline significantly. But, not go down to zero, if that's your question.

Okay. And in terms of [Foglera], how is that -- the sales tracking? I know it just launched by Fresenius, right?

Yes, correct. It is launched by Fresenius. We actually don't have a good visibility on the sales from Fresenius. But, the IMS data, as you can imagine as with any new drug, is still ramping up.

Do you anticipate having royalty payments in Q4, or would that be --

That would be way too ambitious.

Okay. All right, then. Thank you.

Thank you.

Matthew Harman, Clearview.

Hi, Raafat. How are you?

Hi, Matt. How are you doing?

Okay, thanks. The question -- the previous caller asked a couple of questions I had for you, but one question with regard to the Phase 2, trial 3 results. If they come back at the end of the year disappointing like the first set of results, what is the Board's game plan and time frame for identifying liquidation options or other alternatives? What's the time frame for that?

So, the expectation is shortly after we find the results, we will have, in essence, a plan for strategic alternatives, once that happens. So, shortly after the results, the Board is expected to then make a determination of what the plan looks like from a strategic alternatives perspective. Does that answer your question, Matt?

Yes, I think so. And, has there been any conversation to date with Glaxo about potentially restructuring our arrangement with them, depending on the results, or have there been any conversations that would incorporate making any sort of adjustments to the arrangement we have with them?

As you can imagine, both us and GSK are waiting for the results of the second Phase III trial. It would be premature to discuss anything before we get the results of that trial.

That's what I assumed, Just wanted to make sure, and see if there was any conversations you had. And also, one last thing. Is there any desire by the Company, obviously it is all depending upon the results of the year-end results, but is there any desire to invest more money to -- or capability to invest more money to redo some or all of the Phase III trials? Is that a possibility?

That is not the expectation. So, if you're asking whether Nabi on its own would conduct another Phase III trial on its own, that is not the expectation. The expectation would be that if anything like this happened, it would be with somebody else, in collaboration with somebody else, or by somebody else all together.

Okay. Great. I will jump back in the queue. Thanks.

Great.

(Operator Instructions)

Charles [Lechiaro], Prime Investments.

Yes, good afternoon. Great job on conserving cash here, gentlemen. Just a quick question on the actions of the trial that is wrapping up. Is the end points, and actually the way you guys stage it, is it almost mirrored to your first trial or is there much of a difference? I notice you guys keep talking about expecting. Obviously, you never know what is going to come out of a trial at the end of it until it completes, but I would think it is a totally different population in that trial. Is that something that may take effect here?

Well, the population both trials were conducted in the United States. So sure, any 2 trials would have different populations simply because of the regional differences and what not. But, by and large, both trials have identical design, identical primary end points. And you know, inasmuch as one can determine, identical populations.

Okay. As far as GSK, I mean obviously they still have the right to pull out of this at any time without any kind of penalty, that is correct?

They can pull out of this without -- they can elect not to exercise the option, if that's what you mean.

That's what I meant, yes, correct.

Yes, they have the right not to exercise the option.

And has there been any kind of talk at all about the next generation NicVAX or is that something you guys did -- everything is on hold until these trials finish up?

We have lots of discussions on the second generation, second generation development, and until the results of the second Phase III trial is known and adjusted, our understanding is that the second generation continues.

Well, great job. Hopefully the trial looks a little bit better than the first, and we will all keep our fingers crossed on this one. Thank you very much.

Thank you very much for your questions.

Matthew Harman, Clearview.

Hey, Raafat. (multiple speakers) (laughter) I just thought of another one while I was on hold. Has the Company hired an advisor, currently, to prepare to look at alternatives due to the failure of the NicVAX trials?

This will be announced in tandem with the Board's view of the strategic alternatives, Matt. So, until that happens, we cannot comment on any of that.

Okay. And also, can you, maybe, give us some guidance as to what the current head count at the firm looks like, assuming there was -- obviously, you guys have done a good job to limit some costs, and I assume reduce some of the head counts since the last quarter. Just curious where the current head count stands.

We are approximately, now, 25.

And, is that including senior management?

That includes everybody in the Company.

Very good. That's helpful. Thanks very much.

Thank you.

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Dr. Fahim for any closing remarks.

Well, thank you all for joining us today and for your continued support of Nabi. Goodbye.

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