Nabi Biopharmaceuticals Q2 2008 Earnings Call Transcript

Nabi Biopharmaceuticals (NABI)

Q2 2008 Earnings Call

August 7, 2008 4:30 pm ET

Executives

Greg Fries - Manager, Investor Relations

Raafat Fahim - President and Chief Executive Officer

Paul Kessler - Senior Vice President, Clinical, Medical and Regulatory Affairs

Analysts

Richard Mansouri - DCM Fund

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2008 Nabi Biopharmaceuticals Earnings Conference Call. My name is [Carissa] and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this call. (Operator Instructions).

I will now turn like to turn the presentation over to your host of today’s call, Mr. Greg Fries. Please proceed.

Greg Fries - Manager, Investors Relations

Thanks, Carissa, and good afternoon, and thank you all for joining us today. As a reminder, the news release announcing our second quarter 2008 financial results is available on our website at www.nabi.com. I’d 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 29, 2007 and in our quarterly reported Form 10-Q for the quarter ended March 29, 2008 both filed with the Securities and Exchange Commission. More information is also available on the website at www.nabi.com.

At this time, I’d like to turn the call over to Dr. Raafat Fahim, President and Chief Executive Officer of Nabi. Raafat?

Raafat Fahim - President and Chief Executive Officer

Thank you, Greg, and thank you all for participating in the call. Joining me for today call is Dr. Paul Kessler, Senior Vice President, Clinical, Medical and Regulatory Affairs. On this call, I’ll be talking to you about our second quarter financial results; but before we review the financial results, I’d like to discuss a few other important subjects.

I know many of you are interested in the progress of our strategic alternatives process. As, you know this process is focused on, but not limited to, the sale or merger of the company or the out licensing of our product candidates. This process is progressing with the interest from several parties. We remain focus on maximizing the value of our assets for the benefit of all our shareholders. This is our primary objective, we also established three development milestone objectives for this year. The first was a Phase II schedule optimization study for NicVAX that is currently in progress. The purpose of this study is to confirm than an optimize schedule which includes an additional dose produces a higher anti-body level in a larger population of vaccinated subjects at the target quit date.

About, two weeks ago, we announced interim data that strongly supports this hypothesis. The data provided clear evidence that’s significantly higher level of anti-protein A and anti- body can be generated faster and in a higher percentage of subjects then those observed in previous trials. This new immunization schedule result in immune response at 14 weeks that was higher than the peak anti-body level achieved following the six months booster dose in the Phase IIB proof of concept study. Significantly the date indicated that more than 80% of subjects achieved the target antibody level at 14 weeks compared to 50% in the Phase II proof of concept at the same time in point.

In addition, this revising schedule was well tolerated. The adverse events profile in this study is comparable to previous NicVAX clinical studies. Achieving this higher antibody level earlier will allow smokers to realize the benefit of the vaccine earlier thereby improving their ability to quit smoking and remain abstinent over the long term. And by significantly increasing antibody levels in the majority of immunized subjects we would increase the likelihood of success in the upcoming Phase III trial schedule to begin later this year. In this Phase III trial we expect to follow the regimen established in the current schedule optimization Phase II study that are aligned the target quick date was peak antibody level and increase the frequency of counseling.

Smoking cessation represents a critical un-mathematical need and an extremely significant market opportunity of which NicVAX should capture a good proportion. We are maintaining our positive momentum and our leadership position to bring the first smoking cessation vaccine to market. Without a doubt, this is a distinct competitive advantage. And we continue to advance the development of two new antigens of our PentaStaph program in order to enable the initiation of Phase I clinical trial in 2009.

Earlier this week we announced that we settled our arbitration proceeding against Inhibitex Incorporated. Under the terms of this settlement, Inhibitex will pay us a total of 2.2 million, 1.7 million in connection with the execution of this settlement and the remaining $0.5 million by October 15, 2008 with 5% interest rate from August 1, 2008. I am pleased to reach the settlement and end this dispute which originated two years ago. The total payments we would receive represent most of the disputed amount and puts an end to future cost associated with this issue.

As most of you know, we announced a $65 million share repurchase program made last year. Since announcing this program we’ve repurchased 9.5 million shares of common stock at an average price of $3.69 per share for a total of $35.2 million leaving a balance of $29.8 million from the originally authorized amount. We did not repurchase additional shares during the second quarter. However, we did repurchased $31.6 million par value of our 2.875% convertible senior notes for $28.9 million, a $2.7 million discount resulting in a $1.8 million gain. As of June 28, 2008, we have $42 million par value of that remaining on our balance sheet compared to $112.4 million one year ago.

Now let’s review the second quarter financial results. For the second quarter the net loss from continuing operations was $3.7 million or $0.07 per share compared to a net loss of $10.5 million or $0.17 per share for the same period in 2007. The $1.8 million gain on retirement of debt I mentioned earlier was recorded as other income and as part of continuing operations. Including the results from discontinued operations the second quarter 2008 net loss was $376,000 or $0.01 per share compared to a net loss of $4.8 million or $0.08 per share in 2007.

General and administrative expenses was $2.9 million compared to $6.4 million in the second quarter of 2007, a decrease of 55%, this decrease reflects the reduced scale of operations after the sale of the biologics business unit and our continuing efforts to reduce overall infrastructure costs.

Research and development expense were $3.3 million compared to $4.7 million in 2007. This 29% decrease is related to reduced overhead costs from our realigned business realigned business and reduced spending on NicVAX. The spending reduction for NicVAX is principally due to the timing of development efforts this year compared to 2007. We expect R&D expense to increase in the second half of this year due to the planned initiation of the Phase III study.

Net cash using continuing operations for the six months ended June 28, 2008 was $13.1 million compared to $25.3 million for the same period in 2007 or a 48% decrease year-to-date. We expect this year, over year gap to narrow during the second half of this year with a planned initiation of the Phase III NicVAX clinical trial.

We ended the quarter with cash, cash equivalents and marketable securities totaling a $160.6 million. This balance includes $1 million collected from sales of Nabi HP that we owe Biotest Pharmaceuticals. Not included in $160.6 million balance is $10.1 million of restricted cash from the sale of the biologics unit to be Biotest. This cash is being held in escrow to support any potential indemnification claims made by Biotest and the balance of this account will then be released to Nabi in April of 2009. As of June 28, 2008, Biotest had not asserted any indemnification claims.

In February, we provided our initial 2008 financial guidance estimates for operating expense and cash used in continuing operations. At that time, our expectations were a reduction in general and administrative expense of approximately 40% for 2008, when compared to 2007. We also estimated an increase in research and development expenses of approximately 45% compared to 2007, based on the assumption that we will move forward with a Phase III study for NicVAX later this year.

Overall, we also expect the total operating expenses to decline slightly when compared to 2007. We expect that cash used by continuing operations to decline by approximately 15% compared to 2007, on the assumptions that we would initiate a Phase III clinical trial for NicVAX in the second half of this year, and that short-term interest rates remain stable. This guidance items was based on the assumption that we would initiate NicVAX Phase III studies by year end. We are on track with our financial plan through the first half of the year and we are maintaining our initial guidance going forward.

That concludes our prepared remarks. Operator, let’s open the call now for questions.

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from the line of Mr. Richard Mansouri of DCM Fund. Please proceed.

Richard Mansouri

Hi, thank you. Just a quick question the strategic alternative process, you say is progressing with interest from several parties, is that interest across the board, i.e., are there people interested possibly in buying the whole company, are there people interested in partnering the compounds, does it run the gambit of interest?

Raafat Fahim

Thank you, Richard for the question. Just as to start with obviously there is, we have very, very promising pipeline and we have a lot of interest in that pipeline. As we stated in the beginning the strategic alternatives process will be a dynamic process and it is a key corporate objective for 2008. But, we also stated when we announced the process that we will not intend to disclose developments with respect to the process unless and until the board of directors has made a decision on its specific transaction and a definitive agreement has been executed. And as such, I really would like to limit the discussion related to that and just indicate that the strategic alternate process is really progressing with several interested parties.

Richard Mansouri

I know that’s good to hear. In terms of the programs, you programs, you said programs -- the implication is that there could be interest in NicVAX and also StaffEX is that here?

Raafat Fahim

That is a fair statement and that is absolutely accurate.

Richard Mansouri

Okay, great. Thank you.

Operator

(Operator Instructions). There are no further questions in queue. I would like to turn the call back over to management for closing remarks.

Raafat Fahim

Thank you, Operator. As you have heard today, we continue to make solid progress with our financial and clinical milestone goals. The interim data from the NicVAX immunogenicity study are very encouraging. We continue to have discussions with interested parties regarding our strategic alternative process and strategic partnership process.

We are on schedule with the clinical milestones we established for 2008 to reduce that by $31.6 million in the second quarter, and our financial performance through the second quarters is inline with our expectations. Our commitment to accomplish our corporate and clinical goals is resolute and focused on delivering value to Nabi shareholders and stakeholders. I hope you will agree that we have made great progress in the first half of this year and I’m confident in our ability to continue this positive momentum. Nabi management, its employees and our Board are fully committed to achieving these goals. Thank you for all for joining us today and thank you for your support.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you.