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Executives

Eric Sorkin – Chairman and CEO

Analysts

John Hughes [ph]

Augie Petrollo [ph]

Lance McKinley [ph]

Immtech Pharmaceuticals, Inc. (IMM) F1Q09 (Qtr End 06/30/08) Earnings Call Transcript August 28, 2008 8:00 AM ET

Operator

Ladies and gentlemen, good morning, my name is Stacy and I will be your conference operator today. At this time, I would like to welcome everyone to the Immtech quarterly conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

Mr. Eric Sorkin, Chairman and Chief Executive Officer, you may begin your conference.

Eric Sorkin

Good afternoon and welcome to the Immtech Pharmaceuticals' quarterly conference call. We are pleased to have this opportunity to provide you with an update on our developments at Immtech. As you know, our primary goal in recent months has been to refine our business strategy following discontinuation of the development program for pafuramidine.

Since that time, we have taken important steps to capture the value of Immtech's library of compounds, our experience in drug development and our expertise and relationships in China. We obtained a commitment from the Beijing Capital Medical University, a well-respected establishment in Beijing, to collaborate with us in developing a contract research service enterprise in China. Additionally, we are looking at other strategic opportunities that could be valuable to shareholders.

In July, we brought in Dr. Michael Zasloff, a renowned scientist with decades of experience in research and drug development, to serve as a special advisor to Immtech. His extensive experience in clinical research is an important resource for us.

Our drug development team has decades of combined experience and is furthering efforts targeting a range of serious infectious diseases. In targeting hepatitis C, we now have access to a whole cell in vitro assay to facilitate identifying an antiviral drug candidate.

Additionally, we are working on targeting other viral infections, drug-resistant staph infections and malaria. We continue to receive support from our Scientific Consortium and World Health Organization.

Our library of compounds and our strong patent estate continue to be highly valuable assets. In addition to making progress with our compounds, we also focused on exploring new business opportunities for Immtech. Based on our experience in drug development and our expertise in China, we are excited by both the range of opportunities that are available to us and the progress of these efforts.

I also want to reaffirm that we are moving forward with a strong focus on Immtech's financial health and capital position. We have taken key steps in repositioning our staffing and other needs, which led to reductions in our funding requirements.

We have enough capital for funding through 2008 and into 2009. We will further sharpen our focus on increasing efficiency as we advance this company. On behalf of the team at Immtech and the Board, we thank you for your continued support and looking forward to bringing you updates on the Company's progress.

I am now pleased to take any questions. Thank you.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of John Hughes [ph].

Eric Sorkin

Hi, John, how are you today?

John Hughes

Hello, Rick, how are you?

Eric Sorkin

Good. How are you?

John Hughes

Pretty good. The question I have is you said the finances are good for 2008 into 2009. Can you elaborate on that? You have cut staff. What is the burn rate that we are down to now from what it was prior to the discontinuation of DB289?

Eric Sorkin

Yes, well, basically, if you look at the height of where we were and where we expected to be in 2008, at one point in time, we had six clinical trials that were either scheduled or ongoing. We had a malaria clinical trial, pneumocystis pneumonia clinical trial, the Phase III pivotal trial for trypanosomiasis and a couple of Phase I trials, one of which caused us the discontinuation of pafuramidine.

So, we really are – plus we were preparing to get ready to file two new drug applications that should be filed right around now, if we didn't have this problem. And we were looking to get into China with our Phase III pneumocystis trial. So it was a lot we had going on and what we have done is we have reduced expenses in a number of different areas.

We have become a much more efficient company. We didn't need the staffing we had before, although we have retained core competency, and I am feeling very good about that and our burn rate is down significantly. I would prefer not to quote a burn rate because it really depends on how we do this year, but we definitely have capital available through 2008 and into 2009. It really depends on what other activities take place and what we decide to do and other things that we are working on, which could help alleviate our burn rate, or if it is expanded, but in a positive way, so that we can help become self-sufficient. So I am feeling good about where we are and where we are going as a company.

John Hughes

Okay. Are you looking then to do another – you are going to have to do a fundraising at some point. Is that in the plan?

Eric Sorkin

There are a number of alternatives available, okay. There are a number of alternatives to us available. Potentially, we do another fundraising, but the key goal here is to attain self-sufficiency for the company, and that is why we are looking at all alternatives that we can possibly look at.

John Hughes

And that is a possibility to be self –?

Eric Sorkin

Everything has to be a possibility. Although I will tell you it has been a very difficult marketplace really for all companies, 2008, and then all pharmaceutical companies. The equities markets have been very difficult. In banking in general, it has been very difficult to do anything. But I'm feeling good about our ability to continue to do whatever we need to do.

John Hughes

Okay. And can you elaborate on the Beijing medical university, what we have there?

Eric Sorkin

Well, we have signed a letter of intent with them. We are continuing to move down the road. They have some core competency in certain areas and we are trying to take advantage of those core competencies. So we are continuing to work with them and we are working very closely with them. The goal for us as a company is to maximize net income. So with them, it is looking at what is the best role for both parties to play and what is the best in vivo and in vitro activities there are for us to go into third parties with so that we can maximize the net income and make Immtech a self-sufficient company. So that is what we are working on there.

John Hughes

All right, Rick. Good luck to you, buddy.

Eric Sorkin

Thank you very much, John.

Operator

Your next question comes from the line of Augie Petrollo [ph].

Augie Petrollo

Hi, Rick.

Eric Sorkin

Good afternoon, Augie. How are you?

Augie Petrollo

Pretty good. I have got several questions. I don't know how to quite put them on the table. With respect to your deal with the Chinese and this contract research, it was my understanding that, about this time, we would be seeing some contracts put into place. Could you give us a status of that?

Eric Sorkin

Yes, I think you had a misunderstanding of when we expected to have contracts in place. I have gone over this with a number of groups and we did not expect to have any – and I have been asked the question – any significant revenues in 2008 from the contract research services. We're working to put together the best plan to make sure that we cannot just put through revenues, but turn it into net income. And that is a question of what kind of – are you going to compete head to head with some of the bigger CROs in low-margin business or are you going to try to do some niche business and we have been focused and the Board has been focusing on working on niche business.

Augie Petrollo

Okay, but could you give us a sense of when you think you will be able to put your first peg in the hole?

Eric Sorkin

Until we finish working through our plan, we are not going to be able to do that and I don't anticipate – never anticipated for the last 2.5 to 3 months as we worked through this – any significant revenues coming from that area in 2008.

Augie Petrollo

I wasn't thinking so much of revenue; I was thinking about signed deals. We would like to see – we think what you have got here is pretty good, but we would like to see some of these – a contract gets signed and then another one and another one and that shows that you are off to the races. Okay, let me ask you a different question. We have looked at the stock price and it has been pretty horrible. When we talk to you, your enthusiasm is extremely high and of course, that gives us hope that the company is going to turn around and start uphill again. So I guess could you kind of give us, from your own perspective, a sense of your optimism of the future?

Eric Sorkin

Well, yes. We, the Board and the employees, have been working very hard to turn the corner from the setback that pafuramidine caused all shareholders and we have all felt that pain. And basically, we are moving forward in a number of different areas, some of which I mentioned and some of which I haven't mentioned. We have some very valuable assets. We have the library, we have the Consortium relationship, we have the relationships with the NGOs, we have the clinical staffing and other relationships in China, and we are working to find the best way to maximize shareholder value, which is really what management and the Board are supposed to be doing and that is what we are focusing on doing. I am feeling good about progress we have made in a number of different areas. And based upon all that progress and all the different opportunities potentially open to us, even in this very difficult marketplace for a pharmaceutical company, I am feeling good about our ability to move forward in a very positive way.

Augie Petrollo

So you kind of think that maybe we will start seeing some real progress – because it is hard to get started, but once you get the balls rolling, progress really comes pretty good if you have done a good job in setting up the foundation. So we don't know what you are doing. We have a sense when we talk you and we do pick up your enthusiasm, but we would kind of like to see something more concrete and give us a better feeling.

Eric Sorkin

Completely understand. The reason I am feeling so good about it is because we have a lot of different things going on. And although I don't expect every single one of them to pan out, I expect enough of them to pan out that we can form a very strong base of business and then grow from there. And I think the real key is the Board's and management's focus on financial independence in one way, shape or form or another and we are working on that, whether it is work on our drug discovery efforts and the access to the hepatitis C wholesale assay, which is important for us because utilizing bovine diarrhea virus was not optimal and so now we are in a much more optimal form, or the CRS business with China Medical or other things we are looking at in China or other antiviral programs that we are looking at or potential relationships with the nongovernmental organizations and other things. I would like to wait for them to be completed before I speak on them because you look at a lot of things, but what is really important for us, where we stand right now is getting things done and showing the marketplace that we can continue to get things done. So I agree with you overall, but I am feeling good about where we are going.

Augie Petrollo

Well, I guess what we would like you to do is not wait for three months for another conference call. Set one up in between and come forth with all these good things that are coming to fruition.

Eric Sorkin

If I can get a good enough event there, I would be glad to update people on an interim basis based upon what has been completed, what news release that had just been made, so I can speak about that more. But I understand.

Augie Petrollo

I will give you a barb and then I will shut up. When you do that, don't bury the conference calls in one of your documents. Just issue a press release you are going to have it, so the whole world can see it. It is really frustrating. The last two conference calls, you had not come and issued a separate announcement and this is a deviation from the past. As I have told you before, people don't go into these documents and look for these calls, and I think you do the company a great disservice by not advertising them.

Eric Sorkin

Well, you have mentioned that to me. I have taken it to heart. In the future, we will make sure we do that. So I appreciate the comment.

Augie Petrollo

All right. Thank you very much.

Eric Sorkin

Thank you, Augie.

Operator

Your next question comes from the line of Lance McKinley [ph].

Lance McKinley

I was interested in financial arrangements that were put in place and that has already been addressed by the first question I think. I was just curious if anything sort of – even if something is not to the point where it can be spoken to at this point, if there was some comfort as to potential financing arrangements should they be necessary in the first part of 2009.

Eric Sorkin

Lance, everything – as the Board should be, we look at every opportunity and every alternative. We are going to continue to do that and we have a number of different assets and a number – we are fortunate that even with the size and the market cap we are that we have a number of different alternatives that we can look at. And again, our focus, which has really shifted, is on right now financial independence. We would have had that financial independence had we not had the setback with pafuramidine. But we are going to learn from that and we are going to attempt in every way possible to achieve that financial independence and that is why we are looking at all these different areas. So there is nothing that is not on the table and all alternatives will be explored as they should be, but again, maximizing shareholder value is what we are going to try to achieve and what the whole Board and management has been focusing on.

Lance McKinley

Thank you.

Eric Sorkin

Thank you very much, Lance.

Operator

At this time, there are no further audio questions.

Eric Sorkin

Thank you all very much for your time and your questions. I look forward to speaking to you again. Thank you very much, Stacy.

Operator

Thank you for joining today's Immtech quarterly conference call. You may now disconnect.

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