PharmAthene, Inc. (PIP-AMEX)

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January 1, 2010 Issue

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With Their rPA Anthrax Vaccine SparVax™, A Third Generation rPA Anthrax Vaccine, A Anthrax Antitoxin Valortim® Used As A Therapeutic And For Inhalation Anthrax As Well As Protexia® To Protect Soldiers From Chemical Nerve Agents, Funded For Development And Sale To The United States Government, PharmAthene Is Positioned For Profitability

Company Profile:

PharmAthene, Inc. was formed to meet the critical needs of the United States and its allies by developing and commercializing medical countermeasures against biological and chemical weapons. PharmAthene's lead product development programs include:

- SparVax(TM) - a second generation recombinant protective antigen (rPA) anthrax vaccine

- Third generation rPA anthrax vaccine

- Valortim® - a fully human monoclonal antibody for the prevention and treatment of anthrax infection

- Protexia® - a novel bioscavenger for the prevention and treatment of morbidity and mortality associated with exposure to chemical nerve agents

- RypVax(TM) - a recombinant dual antigen vaccine for plague

David P. Wright
President & Chief Executive Officer

Mr. Wright joined PharmAthene, Inc. as President and Chief Executive Officer in July 2003. Prior to joining PharmAthene he served as President and Chief Operating Officer of GenVec Inc., and previously President and Chief Business Officer of Guilford Pharmaceuticals. Mr. Wright served as Executive Vice President for MedImmune, Inc. from 1990 to 2000 where he was responsible for building MedImmune's commercial operation and growing product sales from $0 to over $400 million per year. Additionally he has held various marketing and sales positions at pharmaceutical companies including Smith-Kline & French, G.D. Searle and Glaxo. Mr. Wright received his Masters of Arts in Speech Pathology and Audiology from the University of South Florida.

 


Healthcare
Biotech - Biodefense
(PIP-AMEX)


PharmAthene, Inc.
One Park Place, Suite 450
Annapolis, MD 21401
Phone: 410-269-2600

 

 

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com
Published -January 1, 2010
Conducted August 2009


CEOCFO:
Mr. Wright, what attracted you to PharmAthene?

Mr. Wright: “It was the unique strategy, the limited amount of inaudible they had in the market. It was where they were positioned in the market and their customers that gave them long-term viability in the market.”

 

CEOCFO: What was the vision when you joined and where is the company today?

Mr. Wright: “When I joined I think the vision of the company was just executing existing contracts that they had with the United States government and foreign governments, and trying to expand into new areas. The vision today is much the same, but on a much grander scale. The company has set its sights on much larger contracts and much larger market opportunities. So it has evolved, but it has evolved into a situation where instead of being a little fish in a big pond, because with the consolidation in the bio-defense space, we have an opportunity to play a much larger role in supplying drugs to the government.”

 

CEOCFO: What do you have on hand?

Mr. Wright: “We have four major classes of products, but we really have six products in total. The first product is an rPA (recombinant protective antigen) that is an anthrax vaccine. We refer to that as SparVax™, which is a drug that we acquired from Avethia Biologics in the UK, and to date we have contract funding in for that product of about $140 billion. The second product is a third generation rPA anthrax vaccine. We received this contracts about a year ago, in the 3rd Quarter of 2008 for a total value of about $85 million, and it is for the development of a third generation anthrax vaccine. The next product is an anthrax antitoxin that goes by the name of Valortim®, which is a fully human monoclonal antibody, and it is both used for as a therapeutic, and as a prophylactic for inhalation anthrax. We have received to date about $27 million in funding for Valortim. Our chemical nerve agent profolaxa is a product called Protexia®, which is to protect the war soldier from chemical warfare in battle. It is made recombinantly, with a transgenic goat and essentially we are taking a human protein, injecting it into a transgenic goat and then that protein is expressed in the milk of a New Zealand goat when it lactates.”

 

CEOCFO: What is the competitive landscape for your products?

Mr. Wright: “We are not selling commercially. All of our products are sold to the US government and the US government also pays for the development. It really depends of the specific product, but for rPA anthrax vaccine our largest competitor is Imergent Biosolutions. There is an Indian company by the name of Panacea Biotechnology that also has an rPA anthrax vaccine.”

 

CEOCFO: What is special about your products?

Mr. Wright: “What we try to do is develop products that we know the US government is going to buy. In other words, we will not spend our dollars or our investors dollars developing a product that we know the government won’t buy because then there are no orders for it. The other thing that we do is we try to buy products, acquire products, or develop products that are the next generation of products that the government will hopefully acquire. For instance on our anthrax vaccine the current Biotrack, which is the current vaccine out there now, it takes 5 doses to treat anthrax, but we are able to do it in 3 doses. We have improved consistency and purity in the way we manufacture it versus the current drug. In general we really are trying to manufacture and create the next generation of products or we are trying to create a product that doesn’t exist right now, for instance on our anthrax antitoxin Valortim. We are the only drug out there that we know of that is capable of neutralizing both free and cell-bound anthrax toxins. In general we are offering the government something that does not exist right now.”

 

CEOCFO: Does the government care that you have several different products that fall under that bio-defense category, or is there an edge to have several different types to work with?

Mr. Wright: “There is an upside and a downside to dealing with the government. As a customer, they do what they want, when they want in the timeframe that they want to do it. At any one time you are only selling one product to the government, you are really being held at bay by the government and if their purchasing cycles slow down, your business is going to slow down. However, if you are able to diversify your risks over multiple products it helps to spread the inherent risk in the business. In general, I don’t think the government cares if you have one product or six products, but I think the one big advantage of having more than one is that we know how to do business with the government. It is not just a matter of developing a drug like a traditional biotech; we have loads of government contract requirements and reporting requirements that we must adhere to, and a typical biotech company doesn’t have to adhere to them. The bottom line is the government doesn’t really care, but they care from the perspective that they trust that we know how to do business.”

 

CEOCFO: What is the financial picture like for PharmaAthene today?

Mr. Wright: “A week ago, we announced that we closed on a $19.4 million convertible note, which allows us to repay some debt that we had outstanding at. We had an outstanding convertible note outstanding and we paid that. We also paid off all of our senior debt that we have had. Right now the only indebtedness the company has is this new convertible note that we issued. We issued it on terms that were favorable to the company and the single most important thing from my perspective is that it gets the company enough cash on its balance sheet that we do take in the normal operational course of business. So we have enough cash on our balance sheet to get us through till the end of 2010.”

 

CEOCFO: I understand that you are going to expand your duties at PharmAthene; would you explain the expanded role?

Mr. Wright: “I have been with the company for 2 ½ years and in the life of a biotech company that is a very long time. We are a very diverse business, and we don’t just do development, but also government contracting, which encompasses a lot. If we did not have government contracts, we would not be in business. We have not had someone running this from an executive level, we have not had someone running an entire government operations area, so at the company I will be taking on a larger role and making sure that we are dealing with the government properly and that are customer is happy. I will also be taking on special projects. We are very inquisitive; since I have been here we have acquired three different products. My background is I am an equity bankers, I spent thirteen years with inaudible. I will continue to focus on our M&A transactions, structuring deals, raising capital. As the company grows, our capital needs will grow and given that is my background, I will continue to focus on that. However, I will not be focusing on the day-to-day accounts that I have in the past. We also have significant operation in the UK and as we move those activities over here to the United States, that will be one of my roles also, consolidating that operation over there and moving it here to the US.”

 

CEOCFO: In closing, why should potential investors pay attention to PharmAthene?

Mr. Wright: “We have over $550 million in government contracts, which we have only executed on a little bit less than half of that. So we still have probably $250 million of existing contracts that we have to bill the government. We are a thinly traded stock, so liquidity is an issue, and we need to increase shareholder liquidity. However, just given the amount of contracts that we have currently plus the amount of contracts that will be awarded by the government, we stand to be recipients of in the next probably six to eight months, is probably close to another $1 billion. So we are on the verge of three break-out events that will change the entire way we do our business and I think the entire way that the Street will look at us. In any day, we can go from a  $2.50 stock to a $3 stock, so if you listen to the Wall Street analysts that cover us right now, they all have strong-buy ratings on us and price targets are anywhere from $5 to $7. I think that if you believe what the analysts say, I think we are undervalued, but also looking at what is in front of us in terms of contract opportunities over the next six months, there is $1 billion in potential new contracts that could come in.”

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“We have over $550 million in government contracts, which we have only executed on a little bit less than half of that. So we still have probably $250 million of existing contracts that we have to bill the government. We are a thinly traded stock, so liquidity is an issue, and we need to increase shareholder liquidity. However, just given the amount of contracts that we have currently plus the amount of contracts that will be awarded by the government, we stand to be recipients of in the next probably six to eight months, is probably close to another $1 billion. So we are on the verge of three break-out events that will change the entire way we do our business and I think the entire way that the Street will look at us.” - David P. Wright

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