Vaxart Inc (VXRT) 2012 Q2 法說會逐字稿

Welcome to the Nabi Biopharmaceuticals second-quarter 2012 financial results conference call. My name is Trish, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over to your host, Raafat Fahim. Please go ahead.

Thank you, Trish. Good afternoon, everyone, and thank you for joining us today. The news release announcing our second-quarter 2012 financial results is available on our website at www.Nabi.com. I'd like also to remind you that the statements that are presented in this conference call that are not strictly historical are forward-looking statements. These forward-looking statements are not guarantees of future performance, actions, or results and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. These factors include, but are not limited to, the risks set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission, and our quarterly report on Form 10-Q for the quarter ended March 31, 2012, also filed with the SEC. Additional information is also available on our website. Joining me for today's call is Ron Kocak, Controller and Chief Accounting Officer of Nabi.

Let me start by briefly reviewing our recent activities with a focus on our proposed merger with Biota. On April 23, 2012, we and Biota Holdings Limited, a Melbourne, Australia company, executed a merger implementation agreement to form a combined company that will be named Biota Pharmaceuticals, Inc. The merged company will be listed on NASDAQ and headquartered in the United States. As explained previously, the merger deal has the following features. Nabi will acquire all of the shares of BTA in exchange for newly issued shares of Nabi. Nabi's obligated to deliver to the merged company $54 million in cash net of outstanding liabilities. Nabi's cash balances in excess of the $54 million will be returned to existing Nabi shareholders prior to the merger in the form of dividend, return of capital, or repurchase of outstanding shares of Nabi common stock, or a combination. In accordance with the terms and conditions of recently completed modified Dutch auction tender offer, Nabi has already returned some cash by accepting for purchase an aggregate of 14.547996 million shares of stock at a purchase price of $1.68 per share, for an aggregate cost of approximately $24.4 million, excluding fees and expenses. Consequently, Nabi estimates that the remaining amount of cash to be returned to shareholders of record to be in the range of $1 million to $5 million.

After the completion of the merger, current Biota shareholders will own approximately 74% of Biota Pharmaceuticals, and Nabi's shareholders will own approximately 26% of the merged company. Nabi's Board also intends to distribute a contingent value right prior to the merger providing payment rights arising from certain future sale, transfer, license, or similar transactions involving NicVAX to the extent such transactions occur. Immediately following the closing of the transaction, the Board of Directors of the combined company will consist of six Biota directors and two Nabi directors. Biota's current CEO and CFO will serve as the CEO and CFO of the combined company, respectively, and additional US-based executive will be appointed.

We recently filed with the Securities and Exchange Commission, and initiated mailings to shareholders of record, the definitive proxy statement. We believe the merger will provide the Nabi shareholder the ability to participate in the growth of the combined company. The merged company will have three royalty-generating products, Relenza, Inavir, and potentially PhosLyra. It will have two clinical-stage programs, namely vapendavir, which is a Phase III-ready human rhinovirus program, and laninamivir, a long-acting anti-influenza neuraminidase inhibitor. Laninamivir is already licensed and marketed in Japan under the trade name Inavir, and its development in the United States is being funded by a $231 million contract with BARDA. The combined company will continue to have an interest in NicVAX, as well as in Biota's preclinical programs including RSV, HCV, and an antibiotic gyrase.

The Board of Directors of both Nabi and Biota considered the merger and the related transactions to be advisable and in the best interests of their respective shareholders. Nabi's Board of Directors unanimously recommends that Nabi shareholders approve the shareholder proposal necessary to effect the merger at the shareholders' meeting scheduled for September 24, 2012. We expect to close the merger by year-end 2012 after receipt of approval by both Nabi's and Biota's shareholders and satisfaction of customary closing conditions and receipt of regulatory approvals, including from the Australian courts.

Now let's review the first-quarter financial results. For the quarter ended June 30, 2012, the net loss from continuing operations was $2.7 million, or $0.06 per share, compared to a net loss of $4.6 million, or $0.11 per share, in the second quarter of 2011. Revenue for the second quarter of 2012 was $631,000 related to amortization of the initial up-front payment received from GSK under the NicVAX option and license agreement. Revenue in the second quarter of 2011 was $3.7 million, which included $3.2 million of amortization of the initial up-front payments received from GSK associated with the PentaStaph sale and NicVAX option and license agreement, as well as $500,000 for services provided to GSK under the PentaStaph and NicVAX agreements. Total research and development expenses were $1.3 million for the second quarter of 2012, compared to $6.53 million in the second quarter of 2011. The decrease reflects the substantial reduction in NicVAX-related clinical trials and manufacturing activities. We expect R&D expenses to continue to decline as we wind down the remaining NicVAX clinical trial in the Netherlands.

General and administrative expenses were $2.2 million for the second quarter of 2012, compared to $1.4 million in the second quarter of 2011. The increase reflects costs incurred in connection with the execution of the merger agreement with Biota Holdings, Limited, plus costs recognized for increased severance as we continue to reduce our head count and operations. Net cash used in operating activity was $3.7 million for the first six months of 2012, compared to $9 million in the first six months of 2011. The decrease in cash used is primarily due to NicVAX-related clinical and manufacturing activities in 2012 compared to 2011, and a reduction in overall operating costs. We ended the second quarter with cash, cash equivalents of $92.6 million, compared to $96.4 million at the end of 2011. That concludes our prepared remarks. Operator, let's open the call for questions.

Thank you. We will now begin a question-and-answer session.

(Operator Instructions)

Michael Schechter, Mentor Partners.

Good afternoon. Having just read the proxy, and reflecting on this, I'm at a loss to see how the Board recommends voting for this transaction. Your own liquidation analysis has something north of $1.87 of value. And given where the Biota shares have been trading on a consistent basis, and the risk of investing in a company that will have substantial flow-back issues, I do not understand where the Board stands.

As I mentioned in my prepared remarks, Michael, the Board unanimously recommends the approval of the merger transaction because the potential value of the combined company going forward, based on the portfolio of products that they have, and the reasonably reduced risk of these products, is quite impressive. That's the reason why they are recommending it. You are looking at it --.

Then the Board can go out and go invest in Biota in Australia. But to take a company that is -- whose asset is solely cash and to put it at risk where the market value of the transaction now is about $1.61 to Nabi shareholders versus liquidation value of at least $1.87, there is no rational analysis that I have seen that would say -- approve this transaction.

So, just to make sure that your analysis is correct, I'm not sure where you're coming with $1.87.

Straight out of your proxy, the $92.7 million of cash, the $24.6 million you spent to buy back stock, the $1.5 million of expenses that you put in the deal, and another $13.5 million of expenses to get to a liquidation, which nets you down to $53.1 million, based on 28.4 million shares outstanding is $1.87. About $1.51 to $1.68 that you put in your own document of what you thought the initial distribution and liquidation would be, and an additional $5 million to $10 million available in a liquidating distribution, which shareholders own.

Yes, except that the $5 million to $10 million you are talking about, Michael, these are at risk. So, I'm not sure that, that is a good way of doing it. Besides this you would not get anyway on day one. (multiple speakers)

You get certainly more than the transaction on day one. And your $5 million to $10 million at risk, there's no explanation of what's in the $5 million to $10 million. It doesn't say how much money you're still throwing at NicVAX and the other drugs, which I would argue you could just tear up and go away. There is at least $1.87 of value here. It still doesn't say why we should risk going with this transaction.

So, I appreciate very much your call. And I think I answered your question in the best way I can answer it, Michael, which is the Board recommends it based on the value of the going company, and based on the fact that much of that, or some of that $1.87 that you're talking about is at risk, and you don't get it immediately. That's the best I can help you with, Michael.

(Operator Instructions)

And we have no further questions at this time. I'll now turn the call back for any closing remarks.

Okay. Thank you very much, Trish. And thank you all for joining us today, and for your continued support.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating; you may now disconnect.