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Third Quarter 2005 Financial Results Conference Call Transcript

Moderator: Denis Burger

November 4, 2005 8:00 a.m. Pacific Time

Operator

Welcome to the AVI BioPharma 2005 Third Quarter Financial Results conference call.

At this time all participants are in a listen–only mode.

Following management’s prepared remarks, we’ll hold a Q&A session. To ask question please press star followed by 1 on your touchtone phone. If anyone has difficulty hearing the conference please press star 0 for an operator assistance.

As a reminder this conference this conference is being recorded today, November 4, 2005.

I would now like to turn the conference over to Ms. Jody Cain. Please go ahead ma’am.

Jody Cain:

This is (Jody Cain) with Lippert/Heilshorn & Associates. Thank you for participating in today’s call. Joining me from AVI BioPharma are Denis Burger, chairman and chief executive officer, Alan Timmins, president and chief operating officer and Mark Webb, chief financial officer.

This morning AVI BioPharma released financial results for the third quarter of 2005. If you have not received this new release or if you’d like to be added to the company’s distribution list please call Lippert/Heilshorn in Los Angeles at 310–691–7100 and speak with Cheryl Guertin.

This call is also being broadcast live over the Internet at www.avibio.com and a replay of this call will be available on the company’s Web site for the next two weeks.

Before we begin I’d like to note that comments made by management during this conference call will include forward–looking statements within the meaning of federal securities laws. These forward–looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the AVI BioPharma Annual Report on Form 10–K and subsequent reports as filed with the Securities and Exchange Commission.

Furthermore, the content of this conference call contains time–sensitive information that is accurate only as of the date of the live broadcast, November 4, 2005. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I’d like to turn the call over to Denis Burger.

Denis.

Denis Burger:

Thank you, Jody and thank you all for joining us today. The third quarter and recent weeks have been an exceptionally productive time at AVI and we have several developments to discuss in today’s call.

I will start with a brief overview of several recent events. Mark Webber will summarize our financial results and Alan Timmins will then highlight several programs in greater detail. I will conclude with a review of key programs and will then take your questions.

First, I’m exceptionally pleased to report the initiation of our Phase I/II clinical trial with AVI–4065 in hepatitis C. During the past three years we have compiled a significant amount of data in preparation for this trial and to now be in the clinic is very gratifying. Our goal at AVI is to develop drugs that address life threatening medical needs that affect large numbers of people. HCV certainly meets this profile.

The World Health Organization estimates that $170 million worldwide have chronic HCV infection, which causes an inflammation of the liver and can result in the development of cirrhosis, liver cancer or liver failure.

The current HCV treatment is 24 to 48 weeks of therapy with a combination of interferon and Ribavirin. It is successful in less than 1/2 of the patients infected with genotype 1 HCV, which is the most common form of the virus in the U.S. This treatment regimen has numerous side effects, some of them severe, which make it difficult for nearly of the initially treated patients to tolerate the recommended doses and duration of treatment.

As we have discussed in the past, part of the challenge in treating HCV is the high mutation rate. However as a single–stranded RNA virus, HCV is an attractive candidate for our NeuGene technology which is designed to targeted conserved portions of the viral genetic code that are not likely to mutate over time. This multi–center clinical trial is designed to include up to 80 subjects divided equally between healthy individuals and patients with chronic active HCV. The study is actively enrolling subjects and we expect preliminary data around the end of the year at the earliest.

Moving to our cardiovascular program, I’m pleased to report that we are enrolling patients in Germany in a Phase II APPRAISAL clinical study. This trial is designed to evaluate Resten–MP, which is our NeuGene–based AVI–4126 delivered via our patented micro particle delivery system for the prevention of cardiovascular restenosis.

In this trial Resten–MP is delivered by IV injection in conjunction with the placement of one or more bare–metal stents. Our NUEGENE compound AVI–4126, which we also refer to as Resten–NG, targets the c–myc gene, which is believed to regulate the many downstream events that produce the pathology of restenosis. Resten–NG was found to prevent restenosis in our Phase II AVAIL study in which it was injected directly into the coronary artery using a special drug delivery catheter at the time of stem placement.

In that Phase II study, Resten–NG in a therapeutic dose arm demonstrated statistically significant efficacy in preventing restenosis determined by both quantitative angiography and intravascular ultrasound. The binary restenosis rate was reduced by 75% among patients who received the therapeutic dose.

Prior preclinical studies with our micro particle delivery system have proven it effective at delivering high concentrations of Resten–NG to the sites of vascular injury.

Clearly with the continuing long–term problems experienced with drug eluting stents there is a growing interest in moving away from the polymers that are associated with this complication. This bodes well for both our drug eluting stent program under development and our micro particle delivery system, which avoids drug eluting stents altogether.

These two programs target very large market opportunities. Even today in countries like Germany about 2/3 of stents placed during balloon angioplasty are bare–metal, largely based on concerns of cost effectiveness and long–term complications with drug eluting stents.

The APPRAISAL study’s primary therapeutic endpoint is the subsequent reduction in luminal diameter or late loss from the time of intervention to follow up at six months. Reduction in late loss, which will be measured by quantitative angiography, is the standard indicator cardiologists use to gauge long–term stent efficiency.

With those opening remarks, I’ll ask Mark Webber to review our financial performance.

Mark Webber:

Thanks, Denis. Today I’d like to review our 2005 third quarter results, our cash position and our financial guidance for the year.

Our revenues from license, fees, grants and research contracts in the third quarter of 2005 increased to $3.3 million from revenues of approximately $9,000 reported in the third quarter of 2004. This increase reflects the recognition of $3.2 million in research contract revenue and the receipt of $3.4 million in government funding for work on viral disease projects as well as higher grant revenues.

We were informed in 2004 that we had been allocated $5 million in government funding for the 2005 fiscal year for work on two viral disease research projects. During the third quarter of 2005 we were further informed that this government funding would total $4.6 million.

In September of this year we received $3.4 million of this $4.6 million. The $3.4 million is reflected in this quarter’s financial statement. The remaining funds have not yet been received and are not reflected in our financial statements.

Operating expenses of 2005 third quarter increased slightly to $5.2 million, compared with $5.1 million in the comparable 2004 quarter. The increase was due to higher general and administrative costs, which increased to $1.1 million versus the $1 million in the third quarter of 2004. This increase was partially offset by decreases in research and development expenses to $4.1 million in the third quarter of this year from $4.2 million in the third quarter of 2004.

Approximately $120,000 of this general and administrative increase in the third quarter of 2005 was due to the hiring of additional clinical staff. Approximately $400,000 of this R&D decrease in the third quarter of 2005 was due to lower contracting costs for the production of G&P subunits. These R&D decreases were offset by increases in lab supplies and employee costs.

We reported a net loss for the third quarter of 2005 of $1.7 million or 4 cents per share, which compares to the net loss of $5.1 million or 14 cents per share for the third quarter of 2004.

Revenues for the first nine months of 2005 were approximately $3.4 million, compared with revenues of approximately $145,000 reported for the first nine months of 2004.

Higher revenues this year again reflect recognition of $3.2 million in research and contract revenue and higher grant revenues.

Operating expenses in the first nine months of 2005 decreased to $16 million from $20.3 million for the first nine months of 2004. The decrease in operating expenses was due primarily to a decrease in R&D cost to $12.2 million, compared with $16.9 million in the 2004 period. Approximately $5.5 million of the decrease of R&D expense was due to lower contracting costs for the production of GMP subunits offset by increases in lab supplies, employee costs and clinical trial insurance.

Our 2005 year–to–date net loss was $12.1 million or 28 cents per share, which compares to the net loss of $19.8 million or 55 cents per share for the first nine months of 2004.

We reported cash, cash equivalents and short–term securities of $31 million as of September 30, 2005, an increase of $11.4 million from December 31, 2004. This increase is attributed primarily to the completion of a direct equity placement with several institutional investors for the purchase of 8 million shares of AVI common stock at $3 per share, resulting in net proceeds to the company of $22.3 million, which we announced in January of this year. This will offset by $9.9 million used in operations and approximately $1.2 million used for the purchase of property and equipment and patent–related costs.

We are modifying our financial guidance downward for the full 2005 year. We expect cash burn for the year to be a little less than originally estimated and in the range of $21 to $23 million.

With that overview, I would like to now to turn the call over to Alan Timmins.

Alan Timmins:

Thanks, Mark and let me add my welcome to those of you joining us this morning on the call and on the Internet.

Our NeuGene infectious diseases programs include projects that are being conducted through various collaborations with premier scientists and institutions, governmental agencies and pharmaceutical companies.

Some of the governmental projects are performed under Cooperative Research and Development Agreements or CRADAs, which we have in place currently with the Walter Reed Army Institute of Research, the Centers for Disease Control and Prevention, or CDC, and the U.S. Army Medical Research Institute of Infectious Diseases, or USAMRIID.

Today I want to discuss some highlights from our Department of Defense funded collaborative work with USAMRIID that demonstrated the effectiveness of our NeuGene technologies in combating the Ebola and Marburg viruses and the ricin and anthrax toxins.

Let’s start with Ebola. Ebola virus causes hemorrhagic fever, which historically has killed up to 80% of infected humans. There are currently no approved treatments for Ebola. It’s noteworthy that UAMRIID is the only laboratory in the Department of Defense and one of only a few in the U.S. equipped to safely study highly hazardous infectious agents such as Ebola virus.

Studies with our NeuGene compounds conducted at USAMRIID have now provided evidence of robust efficacy in multiple experiments with mice, guinea pigs and primates. Previous attempts by USAMRIID with the Ebola virus using other technologies of other companies were not successful in treating multiple species. Using the Ebola virus mouse and guinea pig models we targeted six of the seven Ebola virus genes with single and combination agents in prophylactic and therapeutic protocols.

We identified the most effective protocols that resulted in 100% survival at low doses of drug combinations targeting different Ebola genes when administered 24 to 48 hours after virus challenge. Based on the mouse and guinea pig experience, a three–drug combination was used in initial primate studies, which also were successful.

We also have announced progress with NeuGene compounds against the Marburg virus. Marburg hemorrhagic fever, although rare, cropped up in a recent outbreak in Africa and demonstrated a very high mortality rate.

In tests with guinea pigs challenged with high doses of the virus that were 100% lethal in untreated animals, a high survival rate was observed in single agent protocols targeting distinct Marburg genes. We now have plans to test combination agents in experiments similar to those successfully conducted with Ebola.

We also reported positive results from preclinical studies with ricin and with anthrax. Ricin is an enzymatic toxin from the caster bean that inhibits cells from producing proteins, resulting in rapid cell death. Ricin degrades the initiation site on ribosomes, thus blocking protein production from starting. We use antisense to specifically hide the RNA initiation site from the ricin in a reversible manner. Preliminary study results indicate that NeuGene compounds targeting the ricin binding site represent a feasible approach to treatment and proof–of–principle has been established.

Anthrax is an acute infectious disease caused by the spore forming bacterium Bacillus anthracis. The key in its pathogenesis is the production of a lethal toxin. This toxin associates with specific cellular proteins to trigger apoptosis. In the past anthrax in humans was due to an occupational exposure to infected animals or to their products.

However in terms of bioterrorism inhalation anthrax is of course a great concern. Case fatality rates for inhalation anthrax are high, even with appropriate antibiotics and supportive care. Following the bioterrorist attack in the fall of 2001, the case fatality rate among patients with inhalation disease all of whom received aggressive antibiotic therapy was 45%.

Experiments conducted in cell culture indicated that our NeuGene compounds, which had been designed to down regulate the target of the lethal toxin led to increased cell survival without extensive cell death. Preliminary survival experiments in mice showed that almost all mice treated with specific NeuGene compounds survived a lethal challenge with anthrax spores. Together these experiments indicate proof–of–principle of this approach and additional experimentation is ongoing.

We believe that our potential to safely and efficaciously treat a broad range of viruses and even apply this technology against toxins is being widely recognized, as evidenced by our inclusion in an initial 2006 defense funding allocation.

The U.S. Senate Committee on Appropriations has preliminarily allocated $22 million for our research and development programs as part of the federal government’s next fiscal year defense spending bill. It includes allocations for the Ebola, Marburg — Ebola and Marburg viruses as well as the ricin and anthrax toxins plus a new program targeting dengue virus.

Additionally, this allocation, NeuGene technology to combat some of the feared and challenging bioterror threats.

I caution that this spending bill must now be approved by the full Senate, and that the total amount awarded to our company is subject to change.

Before turning the call back to Denis, I’d like to briefly comment on our introduction of a new application for NeuGene technology we call Exon Skipping Pre–RNA Interference Technology, or ESPRIT.

ESPRIT therapeutics are designed either to delete disease causing genetic sequences or to skip functional sequences to redesign proteins that are over expressed or harmful in certain diseases. This is a new approach to solving genetic disorders and diseases caused by over expressed or harmful genes. ESPRIT therapeutics allow for fine genetic surgery at the RNA processing level, providing a new and highly potent tool for altering many disease mechanisms.

We’re pursuing a number of genetic disorders as well as diseases with an immunologic component. The first use of this technology was conducted in Duchenne’s muscular dystrophy through a collaboration with Dr. Steve Wilton, an associate professor and head of the experimental molecular medicine group at the Australian Neuromuscular Research Institute in Perth, Australia.

Muscular dystrophy is the common name for several progressive hereditary diseases that causes muscles to weaken and to degenerate. It impacts an estimated 50,000 to 250,000 individuals each year.

In a mouse model by targeting the defective Duchenne type muscular dystrophy dystrophin gene with an ESPRIT compound, Dr. Wilton was able to force the cell to snip out the disease causing mutation in that region. Using this approach a mostly functional dystrophin protein could be made that would previously only have been a non–functional protein.

And with that, I’d like to turn the call back to Denis.

Denis Burger:

Thanks, Alan. As we have discussed we believe our NeuGene–based antiviral and antitoxin projects, which we call our “rapid response therapeutics,” have a significant role to play in the future of bioterrorism defense and also we have an important public health impact.

Among the health issues currently at the forefront of public awareness is avian flu. Studies with NeuGene compounds in several laboratories have demonstrated the ability to target conserved regions of all significant influenza subtypes. These include avian flu subtype H5N1, which is the cause of the current outbreak in birds and a limited number of humans throughout Asia and in Eastern Europe.

Among the targeted subtypes are the three that caused pandemics in the 20th century -- the 1918 Spanish flu or H1N1, the 1957 Asian flu or H2N2 and the 1968 Hong Kong flue or H3N2, and the three subtypes of avian flu that have been reported to cause disease in humans, namely H5N1, H7N7 and H9N2. This means that a single AVI drug could be efficacious against all six flu subtypes that have ever been known to infect humans, including the avian subtypes.

It is thought that co–infection of man or certain animals with both H1N1, a common flu virus and H5N1 the avian flu virus, can lead to a recombination of viral particles resulting in the emergence of a virus with new antigens to which the human population does not have immunity and also has the ability to spread from person to person. This is the likely general mechanism that led to the worldwide pandemics of 1918, 1957 and 1968.

Our NeuGene technology is well suited to combat this type of viral outbreak as it targets portions of the viral genetic code that are consumed and not likely to mutate. Several of our NeuGene compounds have shown efficacy in early experiments and are now moving forward or in vivo animal evaluation against both H1N1 and H5N1.

In closing, our strategy for drug development is to dedicate internal resources to drug candidates that can be developed rather quickly and target large market opportunities while seeking collaborations and partnerships to support smaller market and longer–term opportunities.

To that end, we are extremely pleased to have initiated two clinical trials in the past several months and indications that represent large market opportunities.

And we also continue to see robust pre–clinical data further validating the antiviral applications of our NeuGene antisense compounds. And finally, we have numerous additional drug opportunities based on our ESPRIT therapeutics.

At this time we’d like to open the call to your questions. Operator.

Question-and-Answer Session

Operator:

Ladies and gentlemen, if you would wish to register for a question for today’s question and answer session you will need to press star then the number 1 on your telephone. You will hear a prompt to acknowledge your request.

If your question has been answered and you wish to withdraw your polling request, you may do so by pressing the star then the number 2. If you are using a speakerphone, please pick up your handset before entering your request. One moment please for the first question.

Denis Burger:While waiting for the first question I would like you to note that Alan Timmins will be making the company presentation at the Rodman & Renshaw Techvest conference next week in New York. If you plan to attend this conference, we encourage you to meet us in person. Our presentation time is Tuesday, November 8 at 10:50 a.m.

Operator:

Our first question comes from Hao Zhou with Rodman & Renshaw.

Hao Zhou:

Hi, good morning guys. Congratulations for a great quarter and ongoing governmental progress. Our first question is on the avian flu programs. Can you guys provide us, you know, some priorities on this program in this particular in regarding to the steps required to obtain any potential fundings targeting the avian flu and also steps necessary for the potential participation in the Bioshield 2 programs? Thanks.

Man:

Thanks for your question. As you know recently some money was allocated at the government level to combat avian flu. I think that in unfortunately typical government fashion I think there’s not a lot of clarity as we sit here today as to how those funds will be distributed, to whom they’ll be distributed and under what circumstances they’ll be distributed.

Avian flu has not yet been included under the heading of Project Bioshield and as you know that’s — Bioshield’s been around now for a year or two and similarly has a little bit of an unclear funding path. So I guess our response to that would be that we will continue to expend the effort, the shoe leather, etcetera to make our progress known on Capital Hill and among those that are — will, either are or will become responsible for the purse strings surrounding things like Project Bioshield or like the avian flu budget allocation such that we’ll be in the right place at the right time and hopefully opportunistic when it comes to garnering some of those funds to press our program forward. Thanks.

Hao Zhou:

Okay cool. The second question is regarding the cardiovascular program. Can you guys going to spend every time providing us specific regarding the (Cap G) trials?

Man:

Which trials?

Hao Zhou:

The (Cap G).

Denis Burger:

One of our most important programs in development is using our AVI–5126 to treat saphenous veins ex vivo before they’re used in coronary artery bypass grafting. The mechanism by which the saphenous veins undergo occlusion first at one year and then with about 65% 10–year failure involves almost an identical mechanism to that in cardiovascular restenosis.

So the key element in the program again is the c–myc gene. And we use AVI–5126, which is a target for c–myc to inhibit the role that c–myc plays in the downstream gene events in (Cab G). We’ve finished a significant amount of our preclinical data and we’ve targeted the first half of 2006 to introduce this program into the clinic.

Hao Zhou:

In second half ’06 or here right it’s second half of ’06 or first half of ’06?

Denis Burger:

The first half of ’06.

Hao Zhou:

Oh it’s the first half of ’06. All right thanks so much. And the last question I have is regarding the $22 million of (probation) funds from the biodefense program. Can you guys give us clarity regarding to how much of these funds if approved by the Senate will be accessible in 2006 and how much you, you know, well how much are you guys able to access, you know? Thanks.

Alan Timmins:

Sure. The way that that works is that once the final allocation is agreed upon we put together a project plan along with, in this case, like the UAMRIID or other governmental entities, we put together a project plan which has certain benchmarks and the accessing of the funds is done basically on a completion of benchmark basis so anywhere from a portion of the $22 million to the whole $22 million would be available to us as we achieve benchmarks over the course of 2006 and, you know, if it goes longer than that then into 2007.

Hao Zhou:

Okay cool. Thanks so much.

Operator:

Your next question comes from Steve Handley with Dutton Associates.

Steve Handley:

Good morning. Maybe I just asked for a little further elaboration on the last question related to the defense funding allocations.

Certainly there’s some unknown or let’s call it a risk related to the exact amount that might — you might receive but once that is done or known could you comment on the — let’s say the contractual formula you operate under in these kinds of situations as it — are there potential risks to you related to excess costs from what you might have projected or are there penalties related to — might come as a result of delays in producing results?

I don’t mean to necessarily focus on the negative — on the positive. Is there sort of a built–in cost plus situation so that once you get this if you deliver it that you know that what your profit will be?

Alan Timmins:

Yeah I think you might be adding a couple of degrees of complexity there that don’t actually exist. It’s really more of a straightaway research contract type of a situation. We agreed to perform certain items within timeframes and much like any other NIH grant or that sort of thing it’s understood that situations arrive that either accelerate the schedule or decelerate the schedule a little bit but it’s less of a risky proposition maybe than your question made it sound like.

Specifically we arrive at benchmarks. We develop those in conjunction with our outside collaborators. In the case of this past year USAMRIID their rate eliminating steps on both sides of the equation this year happened to be USAMRIID had some limitation because they were doing some refurbishment of their BSL4 facilities so that, you know, took a couple of weeks extra that initially we hadn’t anticipated.

But, you know, basically once we’re on the rails with the allocation process we move down it rather quickly. We hit the benchmarks that we’ve set out and then we’re compensated for them by the government. So it’s — and as far as penalties that’s not an aspect of the contract, though facetiously some would say that working with the government is in itself its own penalty. Thanks.

Steve Handley:

Yeah is there a rule of thumb margin of profit with these — dealing with the government on these types of contracts?

Alan Timmins:

Well the word profit and governments those words don’t usually occur in the same sentence. Certainly their overhead fees attributable to each project and those are similar to any other government contract type of situation. But I think I’d caution you using the word profit when you’re talking about anything to do with the government.

Operator:

Your next question comes from Richard Macary with Collectibles, LLC.

Richard Macary:

Hi guys. How are you?

Denis Burger:

Good morning.

Richard Macary:

All right. Two areas of questions — the first I just wanted to focus back in on avian flu and just get a better idea now that this $7 plus billion plan is out there and it seems like there will be as this unfolds the money pointed towards antivirals and drug development.

How far do you plan to go in the work that you’re doing right now preclinical to establish AVI’s technology as being effective against H5N1 to put the company in a position to take advantage of the grant money and eventually the stockpiling that seems obvious is going to happen based on the priorities. Can you just give us more detailed timelines on what’s happening in this area?

Denis Burger:

We plan multiple animal models with both H1N1 and H5N1 with multiple investigators and as you probably know it’s a little easier to do H1N1 experimentation because it doesn’t require the (SL4). And H5N1 requires the (SL4). But we are — have in plans multiple models for both organisms and we’re going to try to d that as expeditiously as possible because we feel that that kind of data is the kind of data that will set us up for funding opportunities.

We’re initiating some programs before the end of the year and some will carry over into the first half of next year and since their research is on reiterative process we can’t give you any further timeline comments.

Richard Mcary:

Might there be any collaborations with any of the government agencies that you’ve been working on with other viruses, be it the NIH or the CDC or USAMRID or has that not been discussed at this point?

Denis Burger:

It has been discussed and we will have collaborations with one or more of those agencies you just mentioned.

Richard Macary:Great.

The second question is just to focus in on Resten–NG to better understand where you’re taking that. It seems like there’s a lot happening in the stent market. Guidant might be an independent company again. A lot of people are wondering bout where that’s going from the polymer stent, polymer–free stent. Can you just give us a little more detail on what’s happening with Resten–NG, the polymer–free stent and give us some insight on where that program is going?

Denis Burger:

Well I’ll slightly evade your question. What we’ve tried to do in our conference calls is to focus on just a couple of areas and we decided on this call we’d focus on our two clinical trials recently initiated. The basis for our “rapid response therapeutics,” which was our programs with the government that lead us to an ideal position to address avian flu.

Now that isn’t to mean that we’re not pleased how some of many of or other programs are going but that’s sort of the rationale behind not mentioning every program. What I will say today is that we are pleased with our development of trying to achieve the goal of a polymer–free drug–eluting stent and that program of course is at or cardiovascular division in Colorado under the direction of (Joe Horn). And we will address in our next conference call a more definitive update on that particular topic.

Richard Macary:Okay.

My last question would just be you mentioned that we would probably see an endpoint in the hepatitis C trial by year end. Does that mean that would be — there would be announcement of the company of the results by year–end from the company or would that, you know, possibly extend into next year just considering when you look at some of the other companies that are brought through hepatitis C drugs.

There’s been, you know, partnerships in pretty early stages after human data. I just wanted to understand, you know, is that the endpoint for an announcement or might that be into next year?

Denis Burger:

I specifically said that by year–end at the earliest.

Richard Macary:

Okay.

Denis Burger:

We’re trying internally in our company to move as quickly as we can to analyze patient data so that we can meet that objective but we recognize some things re often out of our total control, so it could be into the first quarter but we will — we are committed to evaluate and announce the results as soon as we can.

Richard Mcary:

Okay great. Hopefully we see you in New York next week.

Denis Burger: Oh wonderful. Thanks.

Operator:

Once again ladies and gentlemen, as a reminder to register for a question please press star then the number 1 on your telephone.

Your next question comes from Walter Keating with UBS Financial.

Walter Keating:

Hey, good morning guys.

Denis Burger:

Good morning, Walter.

Walter Keating:

Yeah I was really impressed with the — some of the work you’ve been doing in viruses. The estimate you had earlier regarding the cash burn rate of $21 and $23 for next year would $30 — about $30 — between $30 to $31 million in cash currently on hand this — is this still enough to get through the end of next year without having to do any financing? And does that include — I’m assuming that doesn’t include any money from the U.S. government.

Denis Burger:

The current financials that Mark Webber talked about today and the cash burn estimates do not include any consideration of the $22 million preliminary allocation number. To answer your question, based on our financial filings and the third quarter release that we just did, we have the financial resources to operate through the end of 2006. Now classically biotech companies don’t wait until the last dollar is spent to raise money.

And our financial resources include money from partnerships, grants and contracts, as you just mentioned and addressing the capital markets. AVI does not currently have plans to address the capital markets but having said that we’re going to be opportunistic in raising capital if situations arise that are beneficial to the company and its shareholders.

Walter Keating:

Yeah which is what you did back in January and February and stocks spiked up and you were smart enough to sell some stock at that time.

Denis Burger:

Thank you very much for that comment. We felt that that was an opportunity we couldn’t miss and I comment today that sort of the proof is in the pudding and we’re in a position today because we did that.

Walter Keating:

Yeah I’m glad you did. I thought, you know, at the time I was critical but now I…

Denis Burger:

I love it, Walter.

Walter Keating:

So well great guys. You know, it looks like given the amount of cash you have on hand we should have something significant happen soon enough that maybe you won’t need to have a lot of cash soon. Thanks very much.

Denis Burger:

It’d be nice to see the final numbers on the allocation. Thanks so much for the call.

Walter Keating:

Thank you.

Operator: Your next question comes from Clifford Henry with CWH Associates.

Clifford Henry:

Good morning fellows.

Denis Burger:

Good morning.

Clifford Henry:

I just wanted to go back to the avian flu for a second, more a question of has there been any consideration or have you been approached by any of the majors in this to do any kind of joint ventures or development agreements with, you know, somebody like (Chiron) for example?

Denis Burger:

We haven’t been approached by any of the major pharmaceutical companies at this point. But I wouldn’t expect that at this stage. I would expect the interest as we develop animal data.

Clifford Henry:

Okay thank you.

Denis Burger:

Okay.

Operator:

That is all the time we have for today. Please proceed with your presentation or any closing remarks.

Denis Burger:

Well I’d just like to reiterate that the management at AVI feels we had a very strong quarter, both financially and in terms of research progress and getting two trials into the clinical development. And we want to thank you for the continued support.

Thanks again for participating in the call.

Operator:

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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