Joseph Shan - Vice President of Clinical & Regulatory Affairs Steven King - Chief Executive Officer, President, Director, Chief Executive Officer of Avid Bioservices Inc and President of Avid Bioservices Inc Paul Lytle - Chief Financial Officer, Principal Accounting Officer, Corporate Secretary, Chief Financial Officer of Avid Bioservices and Corporate Secretary of Avid Bioservices Philip Thorpe - Member of Scientific Resource Board of Core Technologies Amy Figueroa - IR, BioCom Partners

Joseph Pantginis - Roth Capital Partners, LLC George Zavoico - McNicoll, Lewis & Vlak LLC

Thanks, Melina. Good afternoon, and thank you for joining us on today's call to discuss our financial results for the third quarter fiscal year 2011 ended January 31, 2011 and review our clinical development programs.

Participating on today's call are Steve King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President of Clinical and Regulatory Affairs; and we have a special guest today, Dr. Phil Thorpe, President of Pharmacology at UT Southwestern Medical Center, Scientific Adviser to Peregrine and inventor of our PS-targeting technology.

Before we begin, we would like to advise that this conference call includes forward-looking statements. These forward-looking statements reflect our current views about future events and financial performance and are identified by the use of terms and phrases such as believe, expect, plan, anticipate, on target and similar expressions identifying forward-looking statements.

These factors include, but are not limited to, the risk factors detailed from time to time in our filings with the Securities and Exchange Commission, including, but not limited to, the annual report on Form 10-K for the fiscal year ended April 30, 2010, and quarterly report on Form 10-Q for the quarter ended January 31, 2011, which was filed today. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations; and we expressly do not undertake any duty to update forward-looking statements, whether as a result of new information, future events or otherwise.

I would now like to turn the call over to our CEO, Steve King.

Thank you, Amy. I'd like to start by thanking the investors and analysts that have joined us for the conference call this afternoon.

Before we get started, I would like to ask for a moment of silence in respect of those that have lost their lives in the devastating earthquake in Japan. Thank you.

Peregrine has a unique combination of powerful science, Phase II clinical product candidates and an integrative biomanufacturing business that, together, hold the key to driving future value creation as we move closer to achieving our ultimate goal: To advance novel, monoclonal antibody based therapies with broad therapeutic potential in patients with life-threatening diseases to the marketplace. I would like to start by reviewing recent clinical progress and upcoming milestones for 2011.

Our company focus remains on advancing our clinical pipeline, our largest value driver. Since our last call in December, we have made significant progress, including starting two new randomized Phase II trials, bringing our total to four.

Positive data from these randomized trials should go a long way in validating our technology in several oncology and viral disease indications. These trials have the potential to generate exactly the type of data that investors, as well as potential partners have been waiting for.

Clearly, positive data from these trials should create tremendous value for Peregrine. In addition, we have kicked off our first three investigator-sponsored trials or ISTs.

These trials have the potential to generate data that could again be instrumental in validating the technology platform, as well as guiding future clinical development with new therapeutic combinations or clinical indications. We have not only started new studies, but we have also completed patient enrollment in two trials: A Phase I bavituximab HCV safety study and a Phase II trial for our novel GBM therapy Cotara.

We expect data from these trials be presented over the coming months and in the case of Cotara, should result in the meeting with the FDA in the second half of the year to discuss and define a registrational pathway for the product. Positive Phase II data for Cotara, combined with a clear registrational pathway, will add tremendous value to the program and increase the options for Peregrine from a clinical development as well as a partnering perspective.

To support these advancing programs, we have expanded our management team, bringing onboard Doctor Kerstin Menander as our Head of Medical Oncology. Kerstin has extensive experience in clinical development and has a track record of helping achieve 15 product approvals in the U.S.

and Europe. Throughout Peregrine Avid, we have brought onboard some key professionals in the areas of manufacturing, process science and clinical and regulatory and our team is excited about driving our future success.

Looking ahead this year, we believe our clinical progress will provide a potential robust flow of clinical data reports. Let me quickly review our expected future clinical milestones.

For bavituximab, we expect to complete enrollment in our two randomized Phase II lung cancer trials around midyear, and report interim tumor response data from our front-line open-label study in the second half of the year, followed by top line overall data from both the front and second line double-blinded trials by the end of the year. We also plan to report interim data as available from our recently initiated open-label trials for bavituximab, including the randomized Phase II pancreatic cancer trial and the company-sponsored HCV study, and are hopeful that data may also be available from the three ISTs that are now underway.

For Cotara, we plan on reporting top line data from this Phase II trial by midyear and again, plan on a meeting with the FDA in the second half of the year. While we made great clinical progress this quarter and were successful on the fund raising front, which Paul will highlight later in the call, we did encounter a couple of reason to operational hiccups.

As we mention each quarter on our calls, our contract manufacturing revenues, generated by Avid, fluctuate from quarter-to-quarter due to the level and timing of the services provided to its third-party clients. Revenue for this quarter was $1.9 million, reflecting the typical quarterly fluctuations, as well as a one-time write-off of a lot manufacture for a client that did not meet certain requirements for product release.

These types of events, while not common, do happen in every biologics manufacturing operation due to the highly complex nature of the business. Despite the setback this quarter, we remain on track to meet our full year revenue guidance of between $8 million and $12 million, probably following more in the $8 million to $10 million range, including work which is now underway as part of a biosimilar development contract signed late last year.

Our second hiccup was learning that the government does not intend to exercise the remaining one-year option periods for our contract studying bavituximab and viral hemorrhagic fever, or VHF, once the current contract expires on March 15. While this news is certainly disappointing, we are grateful to the TMT and DTRA for the opportunity to work together to evaluate bavituximab in its unique potential indication.

We received nearly $24 million in funding over the past 33 months of the four-year total $36 million contract. This funding has allowed us to better understand our antibodies use in viral hemorrhagic fever, as well as other viral indications, and has allowed us to advance our overall PS-targeting antibody technology platform.

In the studies we have conducted to date under this contract, our antibodies have demonstrated a significant increase in survival in advanced preclinical models of the highly lethal Ebola virus. However in these specific studies, we weren't able to achieve an adequate dose response correlation to support advancing the program to the next stage.

In no way does this dampen our enthusiasm for bavituximab and the PS-targeting platform infectious diseases, where we believe there is still significant unrealized potential. In addition, we do not expect this development to have a significant impact on the company from a financial standpoint, as most of the remaining funding was a pass-through to subcontractors associated with preclinical testing.

Turning back to our clinical programs and near-term milestones, over the coming weeks and months, we look forward to keeping you updated on our progress. We will be presenting data on the broad therapy potential of our PS-targeting platform with the scientific community, AACR.

Dr. Thorpe will further highlight this later in the call.

We also will highlight clinical data with the medical community at EASL, the International Liver Conference, and other medical conferences throughout the year. We will also continue sharing our story with the investment community through our continued proactive investor outreach program.

We will be presenting at the Roth Investor Conference on Monday at 2:00 p.m. Pacific time, and hope you can listen to the webcast of our corporate presentation then.

I'll now turn the call over to Joe Shan, our Vice President of Clinical and Regulatory Affairs. Joe?

Thanks, Steve. We've initiated and completed a number of studies over the past quarter, and I'd like to spend a few minutes discussing our clinical progress.

Starting with our lead product candidate, bavituximab, we initiated two new trials at the beginning of this year for a total of four randomized Phase II trials in different oncology and viral infection indications. These trials provide us with a number of potential regulatory approval paths and opportunities for commercial success.

Since bavituximab has consistently shown promising clinical and preclinical data in multiple indications, we are evaluating its broad therapeutic potential through both company-sponsored and investigator-sponsored trials. Beginning with our non-small cell lung cancer program, we're advancing two randomized Phase II trials with the goal of completing patient enrollment in both trials by the middle of this year.

Our second line lung cancer trial is a double-blinded placebo-controlled trial in up to 120 patients, and we expect to have top line unblinded data toward the end of this year. We are also conducting a front line lung cancer trial and plan to enroll 86 patients.

Since this is an open-label study, we have the potential to report interim data before the end of this year. While we remain committed to meeting our enrollment milestones, I'd like to mention that the landscape for conducting clinical trials is becoming more challenging on an industry-wide basis, with competition for patients from other trials, strict enrollment criteria and a dynamic regulatory environment.

But we are proactively addressing these issues through strategies including opening additional clinical sites, expanding into new countries and adjusting enrollment criteria with regulatory agency approval. Additionally, we have brought on Doctor Kerstin Menander as our Head of Medical Oncology, who is supporting our trial execution with her extensive experience in this area.

Now in addition to our lung cancer trials, we recently launched two new randomized Phase II trials in January. A pancreatic cancer trial is being conducted at multiple sites in the U.S.

and will treat up to 70 patients with previously untreated stage IV pancreatic cancer. Patients will be randomized to receive gemcitabine with or without bavituximab until disease progression or unacceptable toxicity, and we will assess progressive free survival as the primary endpoint and secondary endpoint of overall response rate, duration of response and survival.

As you may know, pancreatic cancer is the fourth leading cause of cancer death and an extremely aggressive form of cancer, typically diagnosed at a late stage. This high unmet medical need, as well as our prior clinical and preclinical data on bavituximab, led us to select this medication.

Currently, metastatic pancreatic cancer is mainly treated with a standard of care drug, gemcitabine. But unfortunately the prognosis is grim, with a time to progression of roughly two months and overall survival of under six months.

Given this outcome, we're very eager to evaluate in a randomized setting if bavituximab, in combination with gemcitabine, could yield improved patient outcome. We are encouraged by compelling preclinical data demonstrating that gemcitabine increased PS exposure on tumor vasculature, thus providing a more abundant target for bavituximab binding.

Even more promising, enhanced anti-tumor activity and both reduction of primary tumors as well as metastatic disease, was seen with a combination of gemcitabine and bavituximab in tumor models. Now moving on to our bavituximab antiviral program, we have completed patient enrollment in our Phase I HCV study and will present data from this trial in a poster presentation at the EASL Annual Meeting beginning March 30 in Berlin.

We now have conducted a total of three Phase I HCV trials demonstrating bavituximab's acceptable safety and promising signs of antiviral activity. This, combined with preclinical data showing improved antiviral activity when combining bavituximab and ribavirin in some viral models, provides the rationale for our new randomized Phase II trial.

This multi-center, open-label trial will include up to 66 treatment naive genotype-1 patients, who will be randomly assigned to receive ribavirin either with pegylated interferon or bavituximab for up to 12 weeks. The primary endpoint of this study is the proportion of patients achieving early virologic response, or EVR, which is an early predictor of whether a patient might clear a virus after a full 48-week course of standard interferon/ribavirin therapy.

The goal of this trial is to evaluate bavituximab in combination with ribavirin as a potentially less toxic alternative to the current interferon-based standard of care. Now let me quickly review our IST program before turning to Cotara.

We launched our IST program last year as a cost-effective way of evaluating bavituximab's broad therapeutic potential in different oncology indications and therapeutic combinations. Since the program launch, we have evaluated many proposals and have selected a handful to support.

Three have now been initiated, including a Phase I/II trial evaluating bavituximab with sorafenib in patients with advanced liver cancer; a Phase I study evaluating bavituximab with paclitaxel in patients with metastatic HER2-negative breast cancer; and a Phase 1b trial evaluating bavituximab in combination with pemetrexed and carboplatin in metastatic non-small cell lung cancer patients. We expect additional ISTs to begin this year, as trials progress through the IST process.

Now turning to Cotara. We've completed enrollment of the last patient in our Phase II trial in December and continue to collect critical follow-up data, which we plan to report by midyear.

We have seen promising interim data from this trial already, with median survival ranging from 38 to 41 weeks, and a single site of 14 patients reporting 86-week survival. In addition to collecting and analyzing the data, we are in the process of developing a comprehensive, regulatory manufacturing and clinical strategy for Cotara in preparation for a meeting with the FDA that we expect will take place in the second half of 2011.

The goal of this meeting will be to agree on the optimal registration path which will help us determine appropriate future development or partnering strategies for Cotara. We look forward to providing you updates as we advance towards our clinical and regulatory milestones in the upcoming year.

I'll now pass the call to Phil.

Thank you, Joe. I am pleased to be on the call today.

For over 10 years, my research team at UT Southwestern Medical Center has been developing the PS-targeting technology, and we continue to discover new mechanisms of action and therapeutic applications for this broad platform. Our work is stimulating interest in PS research around the world.

PS is the most specific marker of tumor vasculature that my team has discovered. PS is expressed on the vasculature of every solid tumor we have studied.

Its exposure is increased by chemotherapy and radiation, which means that there are opportunities for combination therapies and for the treatment of refractory disease. Let me take a minute to explain the two key mechanisms of action of bavituximab.

Bavituximab is a vascular targeting antibody that hones in on exposed PS on tumor blood vessels. It then recruits immune cells that destroy the cancer blood vessels, leading to a shutdown in blood flow to the tumor and tumor cell death through starvation of oxygen and nutrients.

However, it has now become understood by scientists that PS is a crucial imminent suppressive molecule that prevents our bodies from attacking our own cells when they reach the end of their natural lifespan. We now know that tumor cells, after responding to any kind of chemotherapy or radiation therapy or hormone-deprivation therapy, expose PS when they start to die.

And the exposed PS on the cancer cells paralyzes the immune system of the cancer cell -- the cancer patients, so that they are unable to mount an immune response to their own dying tumor cells, and thus residual disease and distant metastases can regrow. We have found that giving bavituximab, together with other cancer therapies, breaks this vicious cycle by blocking PS and allowing animals to mount immune responses to their tumors that can be curative.

We've seen this in animals with brain cancer and prostate cancer, and we hope that this will ultimately be the case in cancer patients, too. We will be presenting our work at the Annual Meeting of the American Association for Cancer Research, or the AACR, in April.

This is one of the most important cancer research meetings of the year. We are excited to have four poster presentations for this year's conference.

One of these posters includes the data that formed the foundation for Peregrine's ongoing clinical trial in hepatocellular carcinoma patients, which is evaluating bavituximab in combination with sorafenib. The data demonstrates that combining bavituximab with sorafenib significantly improves the tumor response.

Additionally, these posters will highlight specific details of bavituximab's immune reactivation mechanism, its ability to image the response to treatment of cancer in living animals and its ability to induce long-term regressions when combined with hormone deprivation therapy in prostate cancer models. After the AACR, I will deliver a keynote presentation at Informa's Recombinant Antibodies Conference, a leading industry conference in Europe, and we'll elaborate there on further exciting details about bavituximab's mechanism of action.

We will update you with additional information as these conferences begin, and we'll keep you updated on our research progress. Paul?

Thanks, Phil. Let me shift gears now to talk about our financing strategy as it supports our overall corporate objectives.

Over the past several quarters, we have continued to advance and expand our clinical programs toward what we believe could be significant value inflection points for Peregrine, and we have achieved this clinical progress while increasing our cash position to $24.1 million reported at January 31, 2011. This compares to $17.3 million we reported at the end of last quarter.

We have increased and managed our cash balance by executing a financing strategy using several cost effective sources of capital that are available to us. Our first source of capital is contract manufacturing revenue from Avid, which also, as Steve just mentioned, provides strategic benefits to Peregrine.

During the nine months ended January 31, 2011, Avid generated $6.5 million in revenue from its third-party clients, while also providing Peregrine with over $10 million in biomanufacturing services during the same period. The second source comes from several government opportunities.

During the nine months ended January 31, 2011, we received grant funding of $1 million under Section 48D of the Internal Revenue Code, and we recognized $4 million under our first government contract. Looking forward, we will continue to pursue additional government funding opportunities for antibodies not only for antiviral applications, but also for oncology applications, including the indirect funding our clinical investigators may receive in supporting our investigator-sponsored trials.

Our next source of potential capital remains relatively untapped, since our later stage clinical assets, bavituximab and Cotara, remain mostly unencumbered and have great partnering potential. As we generate randomized data for bavituximab and define the optimal registration path for Cotara, we believe significant value could be added to these two programs over the coming months.

In addition to these sources of capital, we also look to the equity markets. This is common among all development stage biopharmaceutical companies, and we have been able to see some of these shares accumulate with institutional investors as institutional ownership has increased from 3% a year ago to 20% at last reported.

Our goal is to continue to attract key institutional investors to our story, as we conduct a proactive investor outreach program, including non-deal road shows and presentations and investor conferences throughout the year. Our overriding goal is to maintain a balanced financial approach with various sources of capital and to carefully manage our cash burn.

And we plan on doing this as we continue to advance some of the most important studies in the company's history, clinical studies that have the potential to be major inflection points for the company and for our shareholders. We would now like to open the call for your questions.

Operator?

Maybe at first question for Dr. Thorpe.

As you look to the broad mechanisms of action that you've been alluding to and that we've been seeing much data from over the last several years, you're talking more now about data, talking about the immune reactivation mechanisms with bavituximab and PS targeting. Do the data support, from an immune standpoint, any other potential combinations that you might consider based on this immune data beyond chemo and radiation?

Yes, I think we can see that. The story behind the reactivation is that tumor antigens required to be exposed when tumor cells are killed by any kind of therapy.

But what happens is that as the tumor cells die, they expose PS, which quells the immune response, paralyzes the immune response, if you like. And this is how bavituximab is working.

It blocks the PS and allows the tumor antigens to be picked up by dendritic cells and presented to the immune system. So what we'd interpret from that is that any kind of therapy that induces tumor cell killing and PS exposure would benefit from a combination with bavituximab.

We can imagine that one exciting example would be to use bavituximab in combination with androgen deprivation therapy to treat prostate cancer. But we could imagine using bavituximab in combination with aromatase inhibitors in the same way to treat breast cancer, and you can imagine putting bavituximab in combination with other antibodies that see tumor associated antigens.

That's very helpful. If I could sort of go backwards from some of the comments from the company as well.

The general part of the question around bavituximab is now that you have multiple studies going, other, obviously, clinical data will drive your main decisions, but what other factors will go into your goals or decision tree with regard to how you define bavituximab's potential path to market beyond the lead program in lung cancer? And then sort of the follow-on to that, just wanted to get a sense on Joe's comments regarding, you've mentioned, I think, enrollment criteria changes for the lung cancer studies.

Sure. We can take that in two parts.

This is Steve. I'll try to address the first part of that, then I'll let Joe talked about some of the operational activities to really keep us -- what we think is on track for completing patient enrollment in the middle of the year for the two main studies.

But even more broadly, I mean, I think that we have to be proactive as a company with all new studies, because the reality is that the points Joe made are right on, which is there's a lot of competition for clinical trial and release. There's a lot of regulatory changes that are taking place both in the U.S.

and abroad. Obviously, keeping up with those and making those adjustments I think is critical.

I'll let him go into the details. I think as far as our overall development strategy, you're obviously right.

It is primarily data-driven. Clearly, the studies, the four randomized studies, I think, were all critical for those particular indications.

I think what we're looking at as far as our ISTs go is really evaluating what makes the most sense to support from a product standpoint in those clinical studies. And each study is really designed to answer individual questions, some would be signal seeking.

Obviously, we're pretty excited about the liver cancer study because, again, there's a nice, natural tie-in with our HCV program. But I think really looking at how many different combinations can we look at through ISTs and potentially some additional company-sponsored studies, I think they'll hit on some exciting new combinations.

You look at some of the data that will be coming out at AACR really supports going beyond chemotherapy into some other indications. Clearly, radiation is one we're very excited about from a preclinical data support, but also from the mechanism.

So I think the key is to keep asking the questions to the clinical studies, trying to get those early answers and then drive that into the clinical development program as we kind of identify the lead compounds. We're also obviously paying attention to marketing numbers and developing a target product profile that in different indications where we think the drug can be successful, not just from a commercial standpoint but also from a clinical development standpoint, where's the unmet medical need.

So for instance, breast cancer we're extremely excited about, but it is a fragmented indication and we're trying to identify where is the best fit for bavituximab with all the drugs that are in development and currently on the market. So we actually have an entire committee that does nothing but almost look at potential new indications, identify those new indications and how do we go about testing those out.

So Joey, you want to address some of the operational...?

Sure. I think we offer the client as best we can and we've been looking, obviously monitoring the progress of the trials.

Some specifics, we are adjusting and refining some entry criteria based on actual screening activity. These are things that you couldn't really predict, but experience.

You see sites really actively trying to enroll patients and they were a couple of criteria that sort of we're popping out of. Now we have been adjusting to that, but you have to be very careful, too, because the criteria were really agreed upon with FDA previously.

And so now that we have some additional screen experience, we're able to go back and say in order to enroll the study, we have to make some changes and really explain the benefit of doing so. But that takes time to implement.

It's going to get through regulatory processes and then local ethics and then all the regions that we're doing this, and each one has a different process and timeline. That's one example of the efforts that we're putting forth and we continue to be optimistic.

We're working towards this goal of midyear. That's what we're trying our best.

I don't want to be belabor it, I was just curious if you could be any more specific with regard to the -- -- what those criteria were that popped out at you?

I think when we went into early development for the program, it was a totally unknown compound. Targeting PS was a new phenomenon for the FDA and something they have not seen before.

Some of the early concerns the FDA had were around the areas of coagulation, as well as potential bleeding. I think one of the benefits of the meetings we had and really with Rob kind of leading in charge last year, was really to pull together the entire patient database.

We had 240-plus patients worth of data we were able to present to the FDA, showing that many of these concerns that were rightfully there at the beginning of the development program had not manifested themselves in the clinical development. And so I think that some of the criteria were around the entry criteria, around coagulation status of patients and what have you.

But it's really data-driven because we've been able to generate enough data that we feel comfortable with changing some of these criteria that will allow us then to enroll patients into the studies. Because potentially, normal coagulation profile in advanced cancer don't really go well together.

Almost all of these patients have some underlying coagulation history one way or the other. But that's just one example changing some of the medications.

Again, I to further this, I think this is one of the drivers also for bringing Kerstin onboard. She has a really great track record of getting trials completed on time or ahead of time.

So I think adding on some people who really understand also some of the criteria and some of the ways to speed up patient enrollment is going to be critical as we move forward. And then the company just having boots on, they're visiting all the clinical sites.

If the physicians and the teams at the hospitals sense your enthusiasm for the program, then they're a lot more enthusiastic about it then if you just leave them alone and hope that they enroll patients.

A couple of questions. First of all, regarding the hiccups that you guys reported today with the VHF, the viral hemorrhagic fever and the termination of the government contract, what you saw or what the trials and experiments showed with VHF, do they relate at all to the HCV program, similar events that might perhaps bring into question the kinds of results we might expect to see with HCV?

In other words, are we going to see the sort of non -- I think you said there was no-dose relationship, dose response relationship? Or how can you give us some added confidence that that's not going to happen with HCV program?

Sure. I mean, I think first of all, they're very different diseases, obviously, where HCV is more of a chronic infection in patients and the patients are relatively healthy even with HCV.

The hemorrhagic fever, of course, is a very different story, where essentially in the preclinical model, the animals are generally dead within the period of seven to 14 days, and sometimes even faster. So I don't know how many correlations you can really draw between a really dynamic, fast, advancing lethal virus as compared to HCV.

Having said that, of course, we have had dose ranges within our existing HCV program as you've gone forward. One of the things we did in the early study is really look for that dose relationship, we didn't believe that there was a dose relationship really around the three milligrams per kilogram, which from an antibody binding standpoint makes a lot of sense, because that's about the concentration where you expect to have maximal binding.

I think that if you look at our study we just started in HCV patients combining ribavirin plus bavituximab, we are looking at two different dose levels, 0.3 and three milligrams per kilogram. And part of it is just to cover this potential of what you just mentioned, which is it -- might a lower dose be as efficacious as a higher dose.

We know going beyond three milligrams per kilogram doesn't make sense because again, you start to work against yourself from an antibody binding standpoint. But we do want to cover those bases in case there is some correlation there.

Regarding the other hiccup with Avid, manufacturing antibodies biologics, any biologics, can be a pretty touchy business. Witness what's been happening to Genzyme recently and also a couple of years ago with Bayer.

Now this batch issue, I presume -- you said it wasn't with, if I understood it correctly, it wasn't with bavituximab. Was it a contamination of some sort?

Can you provide any more details on that? And does it affect at all your bavituximab production and the potential supply of bavi for all your clinical trials?

Sure, I can address that. I'm really not at liberty to give any sort of details on the exact manufacturing issue.

It was an isolated event. We have done a thorough investigation, we're completing that and really looking to ensure that these sort of issues do not arise in the future.

I think we have one of the best people in Rob to really lead the charge there, again, looking at the root cause and putting in place some means to prevent it in the future. This is not an event or really associated with any of our other products or even that product in the future.

Essentially, this should not affect future batch runs, whether it be for third-party clients or for Avid. So this wasn't some sort of a broad systemic viral infection or one of these other things that have really hurt some other institutions.

So it's isolated, does not affect our supply of bavituximab. In fact, I think almost all of the bavituximab supply for most of the studies have been started is already on hand in models and ready to be shipped out to clinical sites, so I think we're in good shape there.

But we take it very seriously. I mean, anything we can do to reduce the risk.

As I said earlier, these aren't common events. They do happen.

You want them to happen as seldom as possible, and naturally our goal is to improve what we're doing and to be as close to perfect as we can be with the realization that these events are going to happen from time to time.

With regard to Cotara and the registrational pathway that you mentioned you're going to have the discussion with the FDA starting next half of this year. I mean, you really have a considerable amount of data with Cotara, you've got some pretty durable responses.

Why wait? Why not start the discussions earlier?

Well, I think part of this time is needed to really put together an overall strategy, because this is not just clinical data-driven, but also we want to look at the marketplace kind of where we see Cotara fitting into that marketplace, design a Phase III trial that we think -- not only end up with a clinical indication or labeling that will be successful in the marketplace, but also that can enroll the study in a reasonable amount of time. And so we're really thinking through, want to test these trial designs out, the potential outcome of those.

Also on the manufacturing side, this is a drug that does require additional processing after we make the antibody here in our own manufacturing facility, so that means working with third-party vendors for the labeling process. So I think, obviously, we're as anxious to get to that meeting and really work through this with them as we can.

But we also recognize you only get one shot at this, and so when we do this, we really want to put our best foot forward. Because our goal is to get this into decisive trial that can enroll in a roughly short period of timing and give us a quick clinical readout.

And so we're anxious to get there, but again, we want to make sure that when we get there, we are successful and give ourselves the best chance of doing that.

So there's a lot of research that you still have to do before you get to the point where you can actually propose and write a protocol to propose to the FDA.

Yes, I think it's kind of an ebb and flow, because you come up with the ideas and you start to test them out and then you get more feedback and you feed that into the system. And so it requires a lot of modification.

Because then you've got to overlay all of the things that you'd like to do with how does your actual clinical data support that pathway forward. So yes, it's definitely a process.

But again, I think we have a great bunch of people working on this on the clinical side, obviously, on the regulatory side. And so again, I'm letting them guide the ship here as far as when we go there, let's give ourselves the best chance of being successful, because ultimately the outcome of that meeting is extremely important for the program.

And finally, a couple question for Phil. You mentioned two things regarding bavi and PS targeting.

In your press release, you mentioned you just filed a new patent, Compositions Comprising Cell-Impermeant Duramycin Derivatives. Could you explain a little bit what that is and the meaning of that is and how that might be leveraged into commercial products, number one?

And number two, one of your posters at AACR talks about PS targeting as an imaging agent. And this, of course, is very, very important when people are starting any sort of anti-cancer to see what's happening to the tumor.

Does this suggest perhaps you're going to move into the diagnostics area with this and start a diagnostics division?

Certainly, the cost of the images is quite extraordinary. The antibody hones to tumor blood vessels beautifully in all tumors that we've seen with really very, very little of a staining seen in other tissues and that's just what you'd like to see in a diagnostic, and we are looking at that very seriously.

And also from that binding is correlated to response, both with radiotherapy and chemotherapy. So again, we have the possibility of making a diagnostic that would be predictive of response.

We are evaluating that possibility at this time. As regards the patent, that patent is issued, it's not filed.

Duramycin binds PE, binding PE expands our coverage of our broad aminophospholipid-targeting platform, so it really dovetails very beautifully with the existing antibody portfolios. It's expanding our desire to explore different phospholipids as potential targets for therapy and diagnosis.

So is PE sequestered on the inner leaflet like PS is and...

Yes, and thank you for reminding me to say that. Yes, PE is phosphatidylethanolamine and it is the brother of PS.

So where PE goes, so does PS and vice versa. So the two lipids co-segregate normally on the inside surface of the plasma membrane, but in activated cells or apoptotic cells or stress cells, both lipids flip, and both are potential targets for therapeutics or diagnostics.

Phil, I can't wait to see how that develops going forward.

Yes, Duramycin is a little peptide, that's a small molecule and would have quite different qualities from an antibody in terms of penetrants. So we're intrigued to see how it plays out, too.

With four company-sponsored randomized Phase II bavituximab clinical trials underway, three ISTs kicked off and two trials recently completing patient enrollment, we are gearing up for what we expect to be a robust flow of clinical data reports throughout the rest of this year and into next year. This represents significant opportunities for potential value creation over the coming year and we look forward to keeping you posted on our progress.

Again, thank you all for participating in today's phone call.