Pharmathene Q3 2008 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Elemer Piros - Rodham - Analyst : Yes, good afternoon, gentlemen. David, can you hear me?

Question: Elemer Piros - Rodham - Analyst : Yes. So, if you could please provide an update that what are the remaining steps on your part and what sort of remaining issues could be outstanding before you potentially get the SparVax procurement grant awarded?

Question: Elemer Piros - Rodham - Analyst : Now observing that an administrational change or the change of administration would take place in the third week of January, if we slip into January, could some political process interfere with this decision making by an individual or a group of individuals who are part of the outgoing administration?

Question: Elemer Piros - Rodham - Analyst : Okay, and one last question if I may. Have you received formal notification in the past that you would be indemnified from product liability just in case the product had to be used and there are some medical issues arise?

Question: Elemer Piros - Rodham - Analyst : Okay, okay. Thank you very much and congratulations on this good quarter.

Question: Debra Fiakas - Crystal Equity Research - Analyst : Thank you. Gentlemen, you have had quite a run in the most recent few months, both from a funding standpoint as well as from a clinical standpoint. What would you say at this time is the greatest obstacle that you face or your greatest concern in moving from this developmental stage as you said into the procurement stage?

Question: Debra Fiakas - Crystal Equity Research - Analyst : So, then it is a matter of setting priorities or a matter of simply deciding which opportunities to pursue first?

Question: Debra Fiakas - Crystal Equity Research - Analyst : Okay, very good. And then just one housekeeping question in regard to the cash usage in the quarter?

Question: Debra Fiakas - Crystal Equity Research - Analyst : Yes, if you could tell us what the cash usage was.

Question: Debra Fiakas - Crystal Equity Research - Analyst : Okay, so--.

Question: Debra Fiakas - Crystal Equity Research - Analyst : You are saying that the cash burn this particular quarter was approximately $1.5 million?

Question: Debra Fiakas - Crystal Equity Research - Analyst : Okay, excellent. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Daniel Mallin - WBB Securities - Analyst : Hi, guys. Thank you for taking my questions and congratulations on the quarter. Looking for a couple of points of clarification. One, on the Phase -- on the third generation RPA vaccine, you had a nice size award. Is there any insight that could be gained in terms of the size of your award and just remind me if you will for how long that award actually goes? I believe it is three years?

Question: Daniel Mallin - WBB Securities - Analyst : Do you think that BARDA's intention is to ultimately have one winner but maybe several horses in the running along the way, or is there ultimately a desire to have more than one ultimately for procurement?

Question: Daniel Mallin - WBB Securities - Analyst : Okay, thank you. That's helpful. And on the Protexia, you have the Phase I scheduled to start, I believe you said in Q2 of 2009?

Question: Daniel Mallin - WBB Securities - Analyst : Conclude, okay.

Question: Daniel Mallin - WBB Securities - Analyst : And can you remind me, I know that you have significant funding potential tied to this particular program. Is there an inflection point there that is contingent on the results of the Phase 1 trial and if so, what can we expect in terms of milestones moving forward on the Protexia program, specifically with respect to beginning, I guess, the second phase of the procurement-oriented portion of that contract?

Question: Daniel Mallin - WBB Securities - Analyst : So, is it reasonable, do you think, to expect an announcement regarding the second phase of the Protexia contract, the $67 million, sometime in the middle to late 2009?

Question: Daniel Mallin - WBB Securities - Analyst : Okay. And just if you can help me with some color on the Panacea strategic partnership, I know that they have invested a substantial amount. Could you tell me if -- they have quite a portfolio of their own, including some in terms of biodefense. Is this truly a partnership? Are your scientists and their scientists going to be working together on sort of a shared portfolio or are you more or less going to be sort of representing their interests and maybe applying your context and expertise in terms of government contracts to take some of their particular programs forward?

Question: Daniel Mallin - WBB Securities - Analyst : Okay, thanks. That is very helpful. That is all I have and once again, congratulations on the quarter and I am really looking forward to next quarter and some of the milestones that will occur between now and then. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jim DeAngelis - - Analyst : Hi, thank you. A couple of questions about the protest. When was the protest filed, please?

Question: Jim DeAngelis - - Analyst : And did they have the traditional 60-day response period?

Question: Jim DeAngelis - - Analyst : The protest, what is the basis of the protest, the fundamental basis as outlined in the protest?

Question: Jim DeAngelis - - Analyst : But nothing that you had a proprietary or advanced basis for bidding or you or the other company that is still in this competition?

Question: Jim DeAngelis - - Analyst : Okay. And although it is very rare, what is the likelihood that this contract or RFP could be set aside and recompeted?

Question: Jim DeAngelis - - Analyst : Is there a small business set aside or an 8A on this contract award?

Question: Jim DeAngelis - - Analyst : So, the protest isn't along those basises?

Question: Jim DeAngelis - - Analyst : And you should know something within the 100-day period certainly?

Question: Jim DeAngelis - - Analyst : Okay. On the -- you mentioned a 90,000 dose, $119 million contract.

Question: Jim DeAngelis - - Analyst : What is your profit margin on that?

Question: Jim DeAngelis - - Analyst : Certainly. On your existing government contracts, is there any release upon milestones that would make your burn rate reduced or have you bid these on a fixed rate lump sum or a fixed price or a, what's the other method that they have there?

Question: Jim DeAngelis - - Analyst : A cost plus basis where your margins are the traditional 3% to 5% and that is all you are going to make on this stuff?

Question: Jim DeAngelis - - Analyst : So, my question is, early on, are you operating as a loss leader on the contract, where the other portions or bands of these contracts will contribute more to your net, reduce your burn rate?

Question: Elemer Piros - Rodham - Analyst : Yes, hi. Maybe along these lines, Chris, if you could help us out, let's assume that you will get a $500 million award, say in the month of January. And for the development phase for the first year, you would get, say, $100 million. How would your monthly cash burn that is right now, say, $1.5 million would be modified under these assumptions? These are just assumptions and hypothetical for the time being.

Question: Elemer Piros - Rodham - Analyst : So, let me try to understand this, Chris. I am sorry, I just wanted to picture it clearly.

Question: Elemer Piros - Rodham - Analyst : So, on $100 million, you have a net margin of 8% to 12%, as David said. So, you have, say, $10 million that you could take with you. Your operational burn would increase nevertheless and net, you would come out that you would spend on the program more than $100 million?

Question: Elemer Piros - Rodham - Analyst : So, your cash burn could actually go down in '09 if you have the contract in place for the Company as a whole?

Question: Elemer Piros - Rodham - Analyst : Thank you. And one question about Protexia, if you could please confirm this. So, for the anthrax vaccines, you don't necessarily have to have a FDA approval in place for the government to stockpile it? But the case may be different for Protexia. Do I understand it correctly?

Question: Elemer Piros - Rodham - Analyst : Okay. And just one question and this is very philosophical, I apologize for it. But a collaboration with Panacea, who could be one of your competitors, what sort of potential liability could that entail and what can you put in to any future agreement so you won't get hurt?

Question: Elemer Piros - Rodham - Analyst : Okay.

Question: Elemer Piros - Rodham - Analyst : Thank you very much, David.