Good day ladies and gentlemen and welcome to the First Quarter 2012 AVI BioPharma Earnings Conference Call. [Operator Instructions] I will now turn the presentation over to your host for today’s conference Erin Cox, Manager of Investor Relations.

Thank you, Sonya. And thank you for joining today's call. Earlier today we released our financial results for the first quarter of 2012. The press release is available on our website at www.AVIBio.com and our 10-Q was filed earlier today. Joining me on the call are Chris Garabedian, our President and Chief Executive Officer and Mike Jacobsen, our Vice President of Finance. I would like to note that during this call we will make a number of statements that are forward-looking including statements about the development and clinical status of AVI’s product candidates and their potential efficacy, clinical results, intellectual property position, revenue, expenses, potential funding from the government and other sources, and collaboration and partnering opportunities. These forward-looking statements involve risks and uncertainties, many of which are beyond AVI’s control. Any such risks could materially and adversely affect the business, results of operations and the trading price of AVI’s common stock. For a detailed description of risks and uncertainties we face, you are encouraged to review the official corporate documents filed with the Securities & Exchange Commission. With that, let me turn the call over to Chris Garabedian, AVI’s President and Chief Executive Officer.

Thank you, Erin. Good afternoon, everyone and thank you for joining us. I’m pleased to provide you with an update and overview of our activities and accomplishments since our last call along with our financial performance in the first quarter of 2012. We reached a very important milestone in our DMD program this quarter. We announced on April 2 that our Phase llb study of Eteplirsen in Duchenne Muscular Dystrophy met its primary endpoint by demonstrating significant levels of novel dystrophin in treated patients after 24 weeks of Eteplirsen, our lead drug candidate for DMD compared to placebo patients. This is also an important study for the muscular dystrophy community in that it is the first placebo controlled study to demonstrate that robust and consistent levels of dystrophin protein, the essential protein that Duchenne Muscular Dystrophy patients are lacking can be produced with drug therapy. We believe this provides tremendous promise to patients with DMD as we know that production of dystrophin is critical for healthy muscle function and may be the key component to slow or halt the progression of the disease. As we announced on our call on April 2nd, the primary efficacy endpoint defined in our protocol and our statistical analysis plan was the increase of dystrophin positive fibers as a percentage of normal compared to baseline and then compared to our placebo group. We met our primary endpoint with a high degree of statistical significance with a p value of 0.002 at our 24 week time point in our 30 milligram per kilogram cohort. We also achieved a higher level of dystrophin production than what we were anticipating, an average of more than 20% dystrophin positive fibers, or approximately 23% as a percentage of normal, a level that the medical literature would suggest should translate to…

Thanks, Chris. For the first quarter of 2012, AVI reported an operating loss of $6.9 million. This compared to an operating loss of $5.5 million in the first quarter of last year. The increase is a result of a $3.1 million decrease in government research and contract revenue partially offset by a $1.7 million decrease in our G&A expenses. Revenue for the first quarter of 2012 was $11.2 million compared to $14.3 million one year ago. $2.4 million of the decrease was due to the completion of the H1N1 flu contract in June of last year and the remaining $700,000 was due to the timing of some subcontracting activities on our ongoing Ebola Marburg contract. R&D expenses were $14.8 million in both the current quarter and the first quarter of last year, but the nature of the spending has changed somewhat between the years. Our spending on DMD increased by $1.8 million due primarily to the ongoing Phase llb trials and we had an additional $400,000 in spending on our other proprietary research. These increases were offset by a $1.2 million reduction in spending on the H1N1 contract that was completed in June of 2011, a $600,000 reduction in subcontractor spending on our ongoing Ebola Marburg contract, and a $400,000 decrease in personnel related costs. D&A expenses in the first quarter this year were $3.3 million compared to $5 million in the first quarter last year. The $1.7 million decrease was primarily due to a $1.1 million decrease in personnel costs related to the December 2011 reorganization and an executive severance package we recorded in the first quarter of 2011. In addition, legal and professional services decreased by $500,000. The net loss for the first quarter of 2012 was $17.7 million or $0.13 per share compared to net income in the first quarter of last year of $1.8 million or $0.02 per share. The $19.5 million change in our net loss was primarily due to $18.2 million in the non-cash expenses associated with the change in the valuation of our outstanding warrants which we record as other income and expense. The remainder, $1.3 million was related to an increase in our operating loss. Turning to the balance sheet, we had cash and cash equivalents of $30.6 million at the end of this quarter. Taking into consideration the funding from our ongoing Ebola and Marburg contract, we believe we have sufficient cash to fund our operations for at least the next 12 months. With that, I’ll turn the call back over to Chris.

Operator, you can open up the call to questions.

[Operator Instructions] Your first question comes from Charles C. Duncan with JMP Securities.

My first question was regarding the ongoing 48 week study. I’m wondering if you’re looking beyond maybe a 6 minute walk test. Are you going to be able to show or explore other measures of clinical benefit such as grip strength?

Yes, we’re collecting other parameters on clinical outcomes and we believe that the 6 minute walk test is again, the most accepted clinical endpoint that has shown some meaningfulness to both regulatory authorities and the broader DMD community. When we looked at some of the other clinical outcomes, we did not see as much -- I should say we saw more variability in those responses. It did not seem to be as telling, a little noisier than the 6 minute walk test and the ambulatory walking scores. So, I think right now we are going to be looking at the 6 minute walk test to tell us the potential treatment affect but we will continue to look at these other parameters to see if they enhance and underscore that signal we would see in the 6 minute walk test. But, this is a long term study and one of the reasons we decided to look at a lot of clinical outcomes is that we expect this cohort to be followed indefinitely beyond 48 weeks and we want to understand if some of these other parameters over the longer term show more of a signal of stability. It’s very possible that some of these other clinical parameters like Gowers maneuver or 4 stair climb test show slower or more rapid decline than walking scores and we’re using this to better understand what are those important clinical outcomes over the longer term.

Okay, that makes sense. With regard to the 48 week study versus say the 24 results, I guess to me it seems somewhat intuitive and I don’t want to minimize the amount of work that’s been done here but to think that a protein could take longer to lay down and have an impact, but when you consider the variables that you could change i.e. longer dosing or more dose intensities such as frequency, what was kind of your thought process there?

Part of the reason for the study design we chose for our 24 week program was to better understand what it takes to produce those meaningful levels of dystrophin. I think we got our answer which is that there is a period of time that you need to accumulate that steady state level of dystrophin on a more consistent basis. Because we achieved that at the lower dose of the 2 doses we studied, we think it underscores that duration of dosing is probably more important than dose level. We also showed that once weekly dosing maybe enough in terms of frequency and that we wouldn’t necessarily have to go to more frequent dosing, or 3 times weekly, or continuous infusion, or something like that. The 48 week biopsy data, as I described in the introductory remarks, I think will be even more telling about do we continue to increase dystrophin, is there a steady state that is reached, is there a dose response between the 50 milligram per kilogram and the 30 milligram per kilogram cohorts? So, I think we have a good signal already based on the 24 week data but I think we’re going to get an even more robust signal and answer a lot more questions with the third biopsy data and that will probably shape our thinking about a pivotal study and what dose and what regiment we will bring into a pivotal confirmed choice study.

Last question is regarding partnering strategy, you mentioned some new thinking along those lines. I guess I’m wondering when you think it might be the best time or strategic time for you to do a partnership? Would it be before you commenced a pivotal program or do you think that you could take this further out down the goal line?

Well, we think that the 48 week data will definitely enhance -- I mean, we’re hopeful that it will enhance the excitement around this program and would lead to better economics around a potential deal with a partner. First, I’ve shifted somewhat in my openness and willingness to consider a partnership because we now know that it may take a longer study, potentially a larger study, where we would need to stratify patients or be more selective about inclusion criteria or power the study with a larger sample size to show a treatment affect. All of those factors would add time and money and given the robust signal we’ve seen to date we think there may be a win-win to have a good partner with deeper pockets to accelerate this program now that we believe it is pretty de-risked. In terms of dystrophin and in terms of safety it’s just a matter of a longer and potentially larger study. So we are currently pursuing discussions with partners and in terms of timing obviously, I think, the feeling of a lot of partners is, “Well, we’ll wait for the 48 week data to do a partnership and we’ll pay more later.” That seems to be the conventional wisdom in the industry. But there is a scarcity value here, we think this is a very hot asset and I think for the right partner we believe they could lock in exclusivity before the 48 week data in a option type structure where we could get an upfront fee to lock in exclusivity with a larger milestone payment coming after the 48 week data, after the program is further de-risked but that partner would have to pay that milestone to continue to be our partner in the program. So we think there are ways to structure deals that mitigate the risk of waiting for the 48 week data but also giving the partner something to lock in or to lock out other potential suitors. So we’re open on the timing but I think there is a way to see a partnership happen sooner rather than later and before the 48 week time point.

Your next question comes from Ted Tenthoff - Piper Jaffray & Co.

I was thinking too as you were mentioning about some of these other clinical endpoints the importance of potential grip strength in non-ambulatory boys. Just from my experience there’s a lot of frustration from parents where the boys have already crossed over to using a wheelchair where they’re not really being included in trials. So just for longer term access, it’s a really interesting and I think important point to look at those other clinical outcomes and strength factors as well. My question has to deal with some of the RT-PCR and other data that you showed with respect to the quality of the dystrophin that was actually being expressed and I was wondering if you could just highlight that? How important is that going to be to the FDA with respect in terms of just augmenting the general affect that you’ve seen at 30 mig per kig dose at 24 weeks?

Let me just comment on your comments about the non-ambulatory population. We have 2 of those patients, those 2 boys I described, they could not complete the 6 minute walk test without assistance by the end of that study, they had progressed quite rapidly. However, they were in the cohort where we showed high inconsistent levels of dystrophin and they continue to receive the drug and in fact, it may be more important in those 2 boys to capture some of the grip strength and we have other things like the 9 hole peg test which is a common non-ambulatory measure. Those 2 boys are still in the study, still receiving drug and we still continue to capture some of the clinical outcomes that could be a signal. I think one possibility of why the industry had started with the ambulatory population is that there are well validated clinical outcomes that have gained approval for other drugs that happen to be walking tests, or tests of an ambulatory patient. I think we will hopefully show some benefit in these upper extremity or strength testing of the upper extremities that could, if the drug is safe, and we’re showing the biochemical marker of dystrophin to be present, that that could lead to a broader approval or indication for the drug. So I just wanted to highlight that since you had brought it up. Regarding the other kind of biochemical measures of dystrophin, this is probably the number one question we get which is these levels look very impressive and they seem to be consistent with the literature in terms of likely translating to clinical benefit but how do you know that the dystrophin is functional. What I highlighted in my notes upfront is that we now have 2 studies in which…

Your next question comes from Bill Tanner with Lazard Capital Markets.

Chris, just on the understanding the number of positive staining fibers, what’s the heterogeneity, I guess the intro patient heterogeneity either inter muscle or intra muscle and just in terms of if you looked at a cross section or whatever -- anyway, if you can understand my question?

That’s a question we get as well. I think the answer we got from this study which was most impressive to us was the consistency that we saw across the patients but also across the samples in the patients. First, let me describe in animal models where we’re able to look at all of the musculature in both the diseased mouse and diseased dog model of Duchenne, which both of those species get Duchenne naturally, when we look at earlier time points we tend to see spottier patches of dystrophin and it is not well distributed or defuse across all of the musculature in the same way. However, and particularly in mouse models, have demonstrated longer term dosing, we start to see the achievement of steady state and better distributed, more well distributed defuse dystrophin throughout the musculature. What the mouse model would suggest is that you need at least 24 weeks of treatment to achieve that steady state and this is exactly the hypothesis we were testing in our study based on a lot of that literature. Now, in humans we don’t have the ability to take multiple biopsies of different muscle groups. This was a surgical biopsy but a single sample. We used alternating bicep muscles to look at the dystrophin. However, we did take that piece of muscle, we cut it into 2 blocks, we sliced that further into the 12 pieces of muscle tissue for staining and we got values for each of those samples. So we had 24 values pre and 24 values post or 48 values that were averaged to get our novel dystrophin production within each patient and then we saw that fairly consistent across the 4 patients at 24 weeks. So we only have that one sample to go by however, it suggests that we may have achieved better distributed and more defuse dystrophin throughout the musculature by taking this random bicep sample and seeing that consistency within the patient and across the patient lead us to believe that this should translate to better muscle function and improvement in clinical outcomes if that’s the case. We won’t unfortunately, be able to look at every muscle group and we have to use these biopsies for a proxy of what is happening in the rest of the musculature of the patients.

So there is no plan or contemplation to look at it in leg muscles? Obviously, that would be important for 6 minute walk. So basically, these are bicep biopsies?

Yes. Well, we did that for a reason. First of all, the third biopsy, we wanted to ensure that it wasn’t taken from the same surgical place that was taken the first biopsy so we’ve allowed quadriceps to be one of those muscles that the third biopsy can be taken from. But, we actually purposely discouraged it and one of the reasons we picked the biceps was because we think it is a large extremity muscle group that would be akin to the quadriceps and we did think that we didn’t want to interfere with surgery on a quadriceps muscle that could impede or interfere with exactly what you’re describing, the walking test and the test of ambulation where we want to make sure that we’re not disrupting their ability, pain, etc., any complication that we associated with surgery, etc., in their legs which is what we’re testing above all.

Fair enough. Then as it relates -- I think you mentioned there were a couple of patients that actually their disease progressed faster than one might expect, how do you guard against that as you do these future trials because obviously, that’s something that’s not going to help out with your detecting of reasonable signal or real signal I guess?

This is why we do clinical studies. We get a data set, we learn from it, and we can shape a better design moving forward in selecting patients. There are a few ways that we could potentially achieve that and we’re evaluating all of those different ways. We want to wait for the 48 week data to have a more robust data set to inform that decision. We want to have a discussion with the FDA to get their feeling after we have the 48 week data to talk about these issues, but there are a few different ways that we can protect against that from happening. One way is if you can craft a lead in phase where patients are on a drug for 16 to 24 weeks before they would be qualifying on the inclusion criteria where you know that you’re producing meaningful level of dystrophin in that treated group versus a placebo for example. You could stratify the population by 6 minute walk either above or below a threshold, let’s say 300 meters or something like that, to make sure you had a good balanced portion in each group and see how that progression is blunted in terms of treatment effect. You could do some type of responder analysis where you predefine who would or wouldn’t be included in the final analysis. There are a few different ways that we can learn from these rapid progressers where a treatment effect isn’t able to take hold before they progress. And that’s something we continue to discuss and we hope to have a discussion with regulatory authorities as well.

Then I guess the last question is I have not heard you mention and I would suspect it’s been thought about, like a sub part H, I mean if this is something that -- this would seem to be if you’re producing dystrophin normally one would think that clinically things would get better and if there’s a timeframe it’s actually fairly long before you can actually seen that. I mean, have you talked to the FDA about potentially pursuing sub part H, or any reason why they would not?

It’s a difficult thing when approaching the FDA. They can easily be turned off by an overly aggressive approach from industry. I already know that the advocacy groups out there would definitely like to see the FDA show some flexibility to accept a biochemical marker for the basis of approval like dystrophin where we know that, that’s the essential protein that’s lacking and we’re restoring it to very high levels. So we believe we’re in a better position to make that argument after we have a fuller data set. So we’ll look at the 48 week data and see if that clinical outcome benefit is more robust and more meaningful. I do know that the FDA has approved drugs in rare diseases where a subset of patients have responded where you don’t have all of the patients respond. And if we could have – there are even products where 1/3 of patients responded on a surrogate marker and gained approval and others where 1/2 the patients respond. So I’m not turned away from the potential of an accelerated approval because a subset of patients might show good response, but I think we want to gather more data before we ask that question of the FDA. Again, as I stated we’ll have a meeting with the FDA planned for later this year after we get a chance to see the 48 week data set.

Your next question comes from Reni Benjamin with Rodman & Renshaw.

Can you let me know or just remind us about the genetic tests that were performed, the sequencing analysis that were performed to get into the trial? Were all these patients that came in, did they have uniform mutations that could be addressed by the exon skipping technology and did they have sequencing that was performed on let's say the RNA from their biopsies after dosing?

Let me answer your last question first, the biopsy samples were run by RT-PCR to show the evidence of the protein. In other words, that we did skip efficiently and that those patients actually were showing exon skipping of the target exon and actually translating to produce that protein. Basically we look for the exon that would be read after the skip of exon 51 so most of these patients is an exon 52 depending on the mutation and so if that’s read out that it means that reading frame is translating to produce the protein. So that was done to show that evidence. In terms of inclusion criteria there are about 7 mutations that would be amendable to an exon 51 skipping drug. We had all of those patients represented in our study. There were 3 genotypes that were represented in the 30 milligram cohort where we did see at 24 weeks robust dystrophin production and importantly, none of those patients had an exon 49/50 deletion. The reason I highlight that is because there was some suggestion in the previous study that we saw a little bit of an outside -- outsized response in patients that had an exon 49/50 that could have been random. People were wondering is this the only genotype that this drug is going to work in? Is there something about the 49/50 genotype that is unique? Well, this study basically addressed that. We had again, 3 genotypes, 4 patients that did not have that that showed higher levels, for the most part, than we saw in the previous study and we have exon 49/50 deletions in the other cohorts where the third biopsy again, will be important because we will have evidence of dystrophin production across all of these genotypes in that 48 week biopsy. The inclusion criteria were based on a genetic test or genetic investigation of exactly what genotype they had that would qualify them for the study and again, this is a commercially available test that can be ordered in any local institution or lab. We’re very confident that these were Duchenne patients based on the outer frame deletions that were captured via the genetic investigation and that we had further evidence that we achieved that exon skipping in the muscle biopsies in those treated patients that produced those high levels of dystrophin.

I guess when we look forward and think about the next data set that’s coming and the longer term exposure, how should we be thinking about the data? I guess what I’m trying to get at here is it already seems like a win, like you should be able to go to the agency, talk about the potential benefit here, the improvement in the 6 minute walk, I mean it was a small trial so you couldn’t expect statistical significance, why go even longer? Why not start talking with the agency right now? And then when you do go longer, what are your no go decision metrics? So for example, if the 6 minute walk test is still the same, do you decide not to move forward with it, or do you decide that either which way you’re moving forward and talking to the agency? How should we be thinking about those results?

I do think we have enough now that suggests that this program should move forward into pivotal studies. There are 3 main questions that we wanted to answer. Number one was the production of dystrophin and we believe that that question was answered in this 24 week cohort and will only be further answered in the 48 week data where we only had 4 patients dosed and biopsied after 24 weeks of treatment in the 48 week time point we’re going to have all 12 who have received either 24 weeks of treatment or 48 weeks of treatment and so we may have on our hands 12 out of 12 patients who show let’s say around or more than 15%, or hopefully an average of 20% across all of those patients of dystrophin in the muscle biopsy. So that’s the first question. I think that is pretty de-risked in terms of the answer we’re expecting. The second one is safety. This is a lifelong chronic disease that is going to require long term therapy and we want to have a safety profile, particularly when we’re dosing children and these boys, I’m sure the parents want to start providing therapy as early as possible. We think safety is important. The fact that we saw no treatment related adverse events, no treatment related lab abnormalities. If we have that at 48 weeks and we’ll have more than 48 weeks when we have the 48 week biopsy data, it is open label so we should have a few more weeks of safety beyond that to go into the FDA meeting with. I think that’s another important element to underscore with the FDA that it doesn’t appear that we’re doing any harm in terms of that risk/benefit ratio. The third question is around the clinical benefit. As I mentioned, there are some who believe that this is enough to suggest that the drug should be available to patients who need it in this very rapid progressing high mortality disease but the FDA will likely want to see some signal of clinical outcome. Now, we think that the 6 minute walk test I described, albeit on a subset of the patients, started to show a signal of benefit here versus the placebo patients. We will have to look at the 48 week data to see if that’s enhanced and if that becomes a compelling data set for the FDA in those discussions. But, we wanted to wait until we had a stronger data set and argument to go to the FDA and we think that 48 week data set could be the answer to that question.

Fair enough. Just one other question regarding the burn going forward for the rest of the year. I know that the first quarter was maybe abnormally high but could you just give us some guidance as to how should we be modeling this for the rest of the year given that the study is extending quite a bit?

We knew going into this year that we had more burn in the first half of the year than the second half of the year and you’re right the first quarter was higher than average as we look across the rest of the year. Also remember, we instituted the reduction in force in December of last year. We had some severance for a lot of those employees. We started cutting a lot of non-essential activities and we didn’t feel the full benefit of those changes in the first quarter but we will throughout the rest of the year. We’ve also curtailed -- I mean, obviously when the stock became more depressed in recent weeks we started to be more sensitive to cash conservation and we’ve made some other adjustments to make sure our cash runway goes longer. We just obviously, put a 10-Q out that highlighted that we have a year of cash that we communicated so we’re comfortable that we have a year of cash on the balance sheet and again, we have a lot of other activities that can be taking place. I mentioned that we could foresee a partnership before the 48 week data that could bring in non-dilutive cash. We have a couple proposals that we submitted to the government and continue to evaluate for our infectious disease programs, other grants that could bring in additional funding. So we think there are other ways to shore up our balance sheet and as we always communicate, we continue to look to make sure we have enough cash to continue operations and we always explore varying financing vehicles, and it’s always a function of where the stock price is, what terms, what the demand is to come into the stock and we continue to evaluate that. Operator, I just want to say everyone at AVI is very excited about the progress we made in the first part of this year across our lead program and we look forward to the continued data set that we can generate from our extension study with Eteplirsen with 48 week data due later this year. Thank you all for calling in and participating in this earnings call.

Ladies and gentlemen that concludes today’s presentation. Thank you for dialing in. Having a wonderful day.