Brickell Biotech Inc (BBI) 2002 Q1 法說會逐字稿

Good afternoon, my name is and I will be your conference facilitator. At this time I would like to welcome everyone to the Vical first quarter 2002 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask any question during this time, invited guests may simply press the number one and star, then the number one on your telephone keypad. Then the questions will be taken in the order they are received. If you would like to withdraw your question press star and then the number two. I would now turn the call over to Mr Alan R. Engbring.

Hello, I am Alan R. Engbring, Director of Investor Relations at Vical. Welcome to our first quarter financial results conference call. Participating on the call today are Vijay Samant, our President and Chief Executive Officer, David C. Kaslow, our Chief Scientific Officer, and Alan E. Dow, J.D, Ph.D., our General Counsel. I will begin with a brief note concerning projections and forecast. .

This call includes forward-looking statements including information regarding expectations for 2002 that are subject to risks and uncertainties that could cause actual results to differ materially from those projected including the risks that falls in Vical's annual report on form 10-K and quarterly reports on form 10-Q filed with the Securities and Exchange Commission as well as the specific risks and uncertainties noted in Vical's news release on first quarter results. These forward-looking statements represent the company's judgment as of today. The company disclaims however, any intents or obligations to update these forward-looking statements. Now I would like to introduce Vical's President and Chief Executive Officer, Mr. Vijay Samant.

Thank you, Alan I will start the call with the brief status report on Allovectin-7 clinical development program and some comments on recent events and financial results then we will open up the session to questions. If time permits we may also address a few questions that were cemented in advance. Chemical programs, our lead product development program Allovectin-7 cancer vaccine for melanoma is progressing on schedule. .

Our phase III registration trial with Allovectin-7 completed enrollment of 200 patients in September of 2001, the last patient in this trial completed the final on-study evaluation on April 2 of this year. We are proceeding with the collection and internal audit of data from this trial of plan. Once the audit is complete, the database will be locked. In parallel we have developed a process for judications of the clinical data by an independent group of radiologists and oncologists and we intent to have the judication process reviewed by the FDA. We expect that the judication process will be finished and the final report of the study's primary end points will be reviewed in the second half of 2002, allowing us to assess whether the data are sufficient to support filing from marketing approval.

A separate phase to study, which I told is not a registration trial is testing high-dose Allovectin-7 in patients with end-stage refractory metastatic melanoma, the same patient population treated in our prior base to registration trial. The new trial has advanced quickly through the doses collection stage and is now treating patients at the full 2 milligram dose compared with the 10 microgram dose in previous trials and for the first time in multiple tumors, this 200 full dose increase is to our knowledge the largest ever allowed by the FDA in the gene curbing trial. The excellent phase III profile of Allovectin-7 has allowed us to explore the potential for the significantly more aggressive treatment regimen. The trial is recruiting well with 67 patients already enrolled and we plan to achieve our initial target at 80 before year-end 2002.

Recent events. Since the last conference call we announce some developments. First we presented our product development strategy at the SG Healthcare conference in March. Second, we received a million dollar payment from Merial. Third, Merck presented initial human data from its HIV vaccine program including supportive data on DNA vaccination and finally we announce the appointment of Dr. Robert C. Merton, Ph.d. Board of Directors. We will discuss each of these items briefly before covering the financial results.

First, we update on our product development strategy. We were delighted to have the opportunity to review our product development strategy at the recent SG Healthcare conference. This strategy defines the pathway for identifying and developing future product candidates and its execution is being driven by our Chief Scientific Officer Dr. David Kaslow. I would like David to tell you more about this. David.

Thanks Vijay. . In today's teleconference I will cover four topics. First, I will provide a quick update of the advancement we have made in our gene delivery technology. Second, I will identify the four areas in which we have focused our current in-house development efforts. Third, I will mention specific progress made in one of those areas and fourth I will briefly review our partnership and our licensing activity.

Advances in our gene delivery technology have been made in three general areas. A composition of the plasmid backbone, the way in which the plasmid is formulated into a product and the way in which the product is delivered. .

With respect to the plasmid we have optimized the design of the plasmid itself by eliminating unnecessary reasons and have optimized each of the remaining components. We have improved and continue to improve the formulation for example by changing the solution which the plasmid is suspended or by mixing the plasmids with substances such as lipid or poloxamers depending upon the desired results and final we have explored and continue to explore alternative delivery method such as electroporation. .

Together these developments have contributed to a dramatic improvements in gene expressions for protein therapeutic applications and immunogenicity for vaccine applications. I want to highlight one particular area in which we are making substantial progress. In December we licensed the library of poloxamers and specific rise to the underlying technology. One of those poloxamers CRL 1005 has demonstrated substantial improvements over naked DNA alone and Merck's HIV vaccine program. We have screened a large number of poloxamers and compared expression and immunogenicity to that obtained with CRL 1005. In our research other poloxamers provided as much as a five-fold improvement over CRL 1005 and we got initiated more detailed studies to further optimize those formulations.

Poloxamers could be included in formulations of T2 product candidates including some those currently advancing toward preclinical studies. By critically assessing the capabilities of our current technology we have identified four product franchises

with the highest probability of success. These four areas are vaccine for infective diseases that are referred to general pediatric and adult population. Vaccines are infectious diseases that remain as unmet medical problems in high risk groups, cancer vaccines particularly for solid tumors and especially melanoma and other cancer biotherapy such cytokine for which there is compelling preclinical efficacy data. We plan to select two targets from these areas in 2002, to advance into preclinical development.

For opportunities outside these four key franchise areas, we plan to continue leveraging our patented technology to licensing and collaborations. We intent to enter into two out-licensing or collaboration agreements in 2002. In addition we grant to use our expertise infrastructure and financial strength to explore in-licensing or acquisition opportunities for late-stage product candidates. We also continue to apply our recognized capabilities in research, manufacturing and regulatory affairs on a contract basis. One very recent example is Vical's agreement to assist the vaccine research center of the in a bowl of vaccine program. Vijay with that I will turn it back to you.

Thank you, David. We are very excited about the progress made so far and we look forward to its continuation. Let me recap some of the other recent events for Vical. First our collaboration with Merial. We recently received a million dollar payment from Merial under the 1995 agreement for preventive vaccine against infectious diseases in domesticated animals. Merial is the leading company in animal house market with the broad range of pharmaceutical and vaccine products both for livestock and pets. .

They have the capacity to commercialize new products on a global basis. We are very pleased that they continue to advance and broaden the application of naked DNA technology and preventive vaccines for animal house. As we noted in our press release, the full 1 million dollar payment will be booked as revenue in the second quarter of 2002. That will bring the total payments received to date under this agreement to 7 million dollars.

Second, the Merck HIV vaccine program. In January Merck published data from HIV vaccine experiments in a non-human primary . These data demonstrated the utility of our core DNA technology in the immune responses and protective immunity. Most scientists also presented initial human data consistent with monkey data in February 2002, the conference and again in April at the Keystone Symposium. .

We are pleased that our technology remains an integral part of the program.

Next I will point with Dr Robert Merton. Dr. Merton joined our Board of Directors in March of this year. He also has agreed to serve as the Chair of our audit committee, a position for which he is well qualified. Dr Merton is a noted scholar and a distinguished educator. He has been the university professor at the Harvard Business School since 1998 and a faculty member at Harvard since 1998. For 18 years before that he served on faculty at MIT's Sloan School of Management. Dr. Merton received the Nobel prize in Economics in 1997 for a new method to determine the value of derivative. He along with Myron Scholes and the late Fischer Black invented the Black-Scholes option pricing model that has become the industry standard for valuing options.

We are excited to add a person of Dr Merton's caliber to our board and we look forward to working closely with him in the future. Before I review financial results, I want to confirm that we are conducting a vigorous defense for intellectual property in Europe. We filed our appeal of the initial grooming by the opposition division of the European priced at the April 23 deadline and we are prosecuting additional divisional patents on our core technology in Europe.

Let me summarize the financial results for the first quarter. As reported yesterday there were no surprises. Results for the first quarter 2002 was consistent without forecast. We reported a net loss of 5.2 million dollars for the first quarter 2002, compared with a net loss of 2 million dollars for the same period in 2001. The increase in net loss compared to first quarter 2001 was primarily a result of decline in investment income reflecting significant reductions in interest rates and lower average cash balances coupled with decrease in revenues and increase in expenses related to expansion of Vical's Research and Development initiative.

Results for the first quarter 2002, do not include the million dollar payment we received from Merial. As of March 31, 2002 we had cash and cash equivalents and marketable securities of 127 million dollars compared with 134 million dollars at the end of 2001. Finally we expect a net loss of between 28 million and 32 million dollar for 2002. This concludes my prepared comments. I would like to open the call now to questions from the participants.

At this time I would like to remind everyone in order to ask a question, please press star and then the number one your telephone keypad. We will pause for just a moment to compile the Q&A .

Your first question comes from Eric Schmidt, Ph.D. of S.G. Cowen Securities.

Good morning, everyone. Just wondering if Vijay has made any progress in further assessing these and what the next milestone is, we should look for them?

I think a terrific question. As we have said you know prior communication that we will be announcing our next milestone with second half of 2002. We have completed our investigation as to what the result, why we had such unsatisfactory results on our renal cell carcinoma trial and that has to do with in vitro potency level of the construct that we have used in this trial. That investigation is complete and we should have some answers for you in the second half of 2002.

Okay. Are you planning any function? Do you have any follow up data from of the earlier Allovectin studies at ASCO?

We had a poster session at ASCO like which will talk about Allovectin-7 phase II and phase III study design. It will also provide update on the Allovectin study survival data. We have updated the survival data as of I think at the end of March. So, you will see, I don't want to tell you what this median survival is, so wait till you see the poster, but we have updated survival data. The game is in the same trend as we had seen previously.

Okay, terrific. Thank you.

Your next question comes from Jonathan Lanfear of A.G. Edwards.

Hello, thank you for taking my call. I had a few questions. First, of the R&D study in this quarter was a little lighter than what we had forecasted. Is this a greater run rate going forward do you feel?

It is timing. As we said, the quarter to quarter timing guidance for the whole year is 20 to 32 million dollar so, I don't think you read too much and do it.

Okay, let me go to phase III Allovectin-7 data, once you process the data, do you feel like going to wake for a suitable conference to present this or which is present when you finish with it?

I think it all depends on the timing. If the data is available and if there is no conference available then we will announce it in a conference call of this nature if that's required in a press release, if an opportunity avails itself to present it at the conference we will make use of that opportunity. Also the data has to be solid to be presented at a conference.

Sure, sure. One last question. Regards to the new phase II Allovectin-7 trial, are there any good data points or should we expect any updates or anything?

What I mean the trial is recruiting well, I don't know what the number is 67, we said and we said that we should complete the enrollment in 2002. We generally, normally don't make announcements as to data points but we will be looking, monitoring that trial very carefully as time goes on. We are excited about that trial.

Okay. Thank very much and congratulations on the quarter.

At this time I would like to remind everyone an additional moment to ask a question by pressing star, then the number one on your telephone keypad.

There are a few questions that we are pleased to meet as people are waiting to ask questions, I thought, let me take short cut through the brief submitted questions and the first questions relates to our registration program and the person is asking what would be required to support a BLA application and we have given answer to this several times in our face-to-face as well as in our press releases. The answer is very straightforward. Based on the guidance to recede falling or meeting with the FDA on March of 2001 and written comments received from the FDA is falling off face-to-face status with them. .

They have reconfirmed first of all the acceptable ready for registration program to marketing approval. If the data meet the study objective and the key thing is that we must get a robust clinical outcome in one of our phase III trials to end-point with no in the other would be sufficient to warrant consideration for marketing approval. We also meet product manufacturing and . But you know this is being well spread out. We know what the end-points are. What it takes or undertakes to get this current approval.

The second question that was submitted and is where David Kaslow you need answer this one. Is it likely that naked DNA expression levels will soon improve to the point that won't be necessary?

Thanks, Vijay. The climbing with DNA and with results in more than an added as main responses now being observed as you know in several model systems. Despite the significant regulatory manufacturing issues associated with the viral vector component, it currently does provide a new paradigm for developing effective vaccines against some very difficult pathogens. .

Nevertheless, I think it is important to realize that there are no data that suggests that continuing to incrementally increase expression levels to translate to continue some improvements in immunogenicity and as such we believe that it unlikely that simple incremental improvements in expression levels by plasma and DNA delivery will result in immune responses achieved by the prime strategy. .

Rather it is the discovery of new break through technologies in the genes we deliver, the formulations that we develop and the delivery systems that will lead us back to the much more practical, single modality vaccine based on the plasma DNA formulation. That is why at Vical research call is not simply to take incremental improve expression level but rarely to create completely new approaches that may make the cumbersome wild strategies unnecessary in future vaccine application. It is always difficult to actually predict how long it makes to accomplish such a goal but certainly we have made this one of our new research priorities.

Vijay.

Thanks, David.

The next question talks about collaborations and the questions is how much revenue is generated from the various license agreement feature?

The number is quite variable and its driven by event such as signing agreements and achieving milestone. Historically we have generated anywhere between 5 to 10 million dollars in revenue last year with an exception, we had a record revenue of 11.4 million dollars but our street guidance for this year is that we expect our net loss to fall between 28 and 32 million dollars.

The next question is a lot Vical's research has been focused on successfully enhancing transaction efficacy. Are any of these enhancements patent about how important do you feel it is to continue strengthening Vical's intellectual property? Alan, you want to take a shot at this?

Yes, certainly Vijay. The answer is yes. Several of these enhancements are already protected by patent. We intend to file other patents and as appropriate based on our Research and Development efforts using these enhancing technology. Vical already has a dominant patent position in non-viral gene therapy. We intend to maintain that strength by descending our current intellectual property. We also intend to expand that position as appropriate by patenting our own invention and licensing additional technology that is needed.

Thank you Alan. Are there any questions from the floor?

We have a question from Mark from Needham & Co.

Hi! Good morning. Please could you step back a little while and give us your comments on the vaccine area in general, active immunotherapy, about the progress and the challenges so far and where you think the overall field is going in next stock 12 to 18 months?

You mean infectious disease vaccines or vaccine?

Okay, I am sorry, in area in general I would like to hear both of what you think of immunotherapy as a treatment modality, or constraining months small molecules and the body therapies in general. I would like to hear more about what your thoughts are in active immunotherapy?

I will have David Kaslow jump in but I will make a comment to begin with. First of all active immunotherapy is going to be a modality for treatment in the future. However, I wanted to be very cautious to make sure that any of the cytokines that you are using for example in this immunotherapy, that there is a challenge model before that particular cytokine is put into an expanded clinical program. One of my feelings is that there are a lot of cytokines, which are right now in clinical programs but is not sufficiently challenged in large animal models. Our intention is that if we are going to take a role in immunotherapy, we are going to make sure, we do sufficient preclinical work before we engage such cytokine into a large clinical program. David, you want to add anything?

I certainly agree with that and certainly I think that the current is that we want to be able to develop biotherapies that are active against a broad spectrum of mutations that are occurring in cancers and now I think it is a challenge for us and we are certainly looking into that.

About milestones, can you update us please, about milestone, what we expect from the company through the end of the year?

The most important milestone is that we are going to have judicated data from Allovectin and trial in the second half 2002. We also said that we are going to announce future developments for Allovectin in the second half of 2002. We said early on the year that we are going to select 2 programs in 2002 to advance from research into preclinical development. We expect to enter into two collaborative agreements in 2002 with two partners and most importantly we expect to begin into a new in the second half 2002 where we are expanding both research and manufacturing.

Thanks very much for the clarification.

Thanks Mark.

I have one last question, presubmitted question and then we will move on. This question relates to if we are working on any targets. Now let me explain to you our technology is a unique technology which has the potential to be used of course, with broad range of application including bio-defense targets and we have to be careful that we don't get carried away, with the application of this technology and we have to be judicious in terms of how we use our resources. As we noted in yesterday's news release, we have agreed to assist the Vaccine Center at NIID in the vaccine program. Of course we are not able to discuss the details of this arrangement because of nature of that arrangement, but we always invite discussions of any party interested in using our technology provided it has commercial applications, not for the sake of research. I hope that ends this question sufficiently. That will bring me to the end of all these submitted questions, are there any more questions there from the floor?

No, sir. There are no further questions.

Well in that case thank you, we look forward to seeing you at the next quarter. Thank you again.

Thank you for participating in today's conference. You may all disconnect.