Raafat Fahim - President & Chief Executive Officer
Ron Kocak - Controller & Chief Accounting Officer
Gregory Fries - Manager of Investor Relations
Sanjay Dori [ph] - Deutsche Bank
Nabi Biopharmaceuticals (NABI) Q3 2009 Earnings Call November 5, 2009 4:30 PM ET
Good day ladies and gentlemen and welcome to the third quarter 2009 Nabi Biopharmaceuticals earnings conference call. My name is Alisha and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (Operator Instructions)
I would now like to turn the presentation over to your host for today’s call, Mr. Greg Fries, Manager of Investor Relations; please proceed.
Thanks you, Alisha. Good afternoon and thank you for joining us today. As a reminder, the news release announcing our third quarter 2009 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 disclosed in our annual report on Form 10-K for the fiscal year ended December 27, 2008 and in our quarterly reports on Form 10-Q for the quarters ended March 28, 2009 and June 27, 2009, both filed with the Securities and Exchange Commission. And more information is also available on our 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 is Dr. Paul Kessler, Senior Vice President, Clinical, Medical and Regulatory Affairs; Dr. Matthew Kalnik, Senior Vice President, Strategic Planning and Business Operations and Mr. Ron Kocak, Controller and Chief Accounting Officer.
We have made significant progress towards achieving our strategic corporate goals and I’d like to review this progress before discussing the quarterly financial results. Yesterday we announced a successful closing of the sale of PentaStaph and related assets to Glaxo SmithKline. This transaction also included the sale of a separate preclinical program for vaccine against Staph epidermidis.
We received a total cash payment of $21,500 million consisting of $20 million associated in the close of the PentaStaph transaction, $1 million for the Staph epidermidis program and 500,000 for reimbursement of license fees and clinical material previously manufactured for the use in the Phase I trial for the new toxoid antigens of PentaStaph.
We also have the opportunity to receive an additional $26 million for achieving four milestones associated with the PentaStaph deal. We expect to accomplish these milestones over the next year and half. In late September, we received two grants totaling approximately $10.5 million that will have fund clinical research for our pipeline products.
First, the National Institute on Drug Abuse or NIDA awarded Nabi $10 million to help fund the first pivotal NicVAX Phase III clinical trial. The second grant of $472,000 was awarded by the Department of Defense deployment related medical research program of the office of the congressionally directed medical research programs to help support clinical research on PentaStaph.
Late last year, we entered into our corporative research and development agreement with US Department of Defense and The Henry M. Jackson Foundation to advance the development of PentaStaph. This grant will offset some of the costs of the upcoming Phase I clinical trial for the two newest PentaStaph components PVL and alpha toxin. Initiation of this clinical trial represents one of the four PentaStaph milestones that I mentioned earlier.
On Monday, we announced an initiation of the first NicVAX Phase III clinical trial. This study is being funded in part by the $10 NIAID grant I mentioned earlier. As you may know, we are conducting this trial under a special protocol assessment or SPA agreement with the FDA, and in accordance with scientific advice that we receive from the European Medicines Agency that confirms and supports the trial protocol.
The SPA along with the scientific advice significantly reduces our regulatory risk for the NicVAX program. Separately our closest nicotine vaccine competitor ZYTO Bio-technology announced that interim analysis of the Phase II study showed that its vaccine did not achieve the primary end point.
All these developments solidified our leadership position in the race to market the world’s first vaccine for smoking cessation and relapse prevention. These events have significantly increased the interest in our program and we are in active discussions with potential strategic partners to further develop on commercialized NicVAX.
In May, we disclosed that Biotest Pharmaceuticals Corporation filed indemnification claims for alleged breaches of representation on warranties made by Nabi in the asset purchase agreement associated with the sale of our biologics business to Biotest in 2007. Biotest subsequently withdrew the $50.4 million claim in early June resulting in the release of $4.5 million of the escrowed Funds to Nabi. The remaining $5.7 million claim was withdrawn on Wednesday and the balance of the restricted cash has been released to us.
Now let’s review the third quarter financial results. For the third quarter the net loss from continuing operations were $7 million or $0.14 per share compared to a net loss of $4.6 million or $0.09 per share for the same period in 2008.
General and administrative expense was $2.4 million compared to $2.1 million in the second quarter of 2008. The increase was primarily due to legal cost associated with the PentaStaph sale transaction and our defense against the indemnification claims filed by the Biotest.
Research and development expense was $4.7 million compared to $3.4 million in 2008. The increase is related to efforts to prepare for the phase III NicVAX trials including manufacturing related activities.
Net cash used in continuing operations for the nine months ended September 26, 2009, was $18.1 million compared to $16 million for the 2008 period. The increase in cash utilization was driven by R&D expenses as we prepared for initiating the first NicVAX phase III trial.
We ended the quarter with cash, cash equivalents and marketable securities totaling $103.3 million and not included in this balance is the $5.7 million of restricted cash that was released to us after the close of the third quarter.
That concludes our prepared remarks. Operator let’s open the call for questions
Question –and-Answer Session
(Operator Instructions) Your first question comes from Sanjay Dori [ph] from Deutsche Bank, please proceed.
Sanjay Dori - Deutsche Bank
Hi, just there were some news in the last 48 hours about Pfizer’s smoking cessation drugs having some better data, how does that affect you and where exactly do you stand with your partnership discussions?
Are you talking about data about sales data?
Sanjay Dori - Deutsche Bank
No, data for the existing drug that was shelved, Chantix I believe.
Yes, but I’m talking about sales data, you are talking about sales data.
Sanjay Dori - Deutsche Bank
Yes, so they actually, in essence Pfizer has been recovering their sales, they have not recovered fully and in fact their sales are still significantly below the forecast that people estimated for it.
So they did recover a little bit from the set back they got after announcement of the adverse events that they have been showing, and we expect that they recover a little bit more, but they will not reach the level of expectation of Chantix because of the side reactions or adverse events that they have been showing with the drug.
In terms of our discussions, as I said in the prepared remarks, that we are in active discussions with strategic partners for NicVAX.
Sanjay Dori - Deutsche Bank
(Operator Instruction) There are currently no audio questions at this time.
Thank you operator. As you have heard today we have made great progress on several fronts. We successfully closed the sale to PentaStaph to GSK and received $21.5 million with an opportunity to receive an additional $26 million contingent on four milestone accomplishments.
We received a $10 million grant from the National Institute on Drug Abuse to partially fund the first NicVAX phase III trial. We initiated the first NicVAX phase III clinical trial. $5.7 million dollars of restricted cash was released to us after the final indemnification claims was withdrawn and in parallel we continue our efforts in controlling our costs. More importantly, we advance our discussions with potential strategic partners to further develop and commercialize NicVAX.
Thank you all for joining us today and thank you for your continued support.
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.
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