Brickell Biotech Inc (BBI) 2002 Q2 法說會逐字稿

Good afternoon. Ladies and gentlemen and welcome to the Vical Incorporated second quarter 2002 financial results conference call. At this time I had like to inform you that this conference is being recorded and that all participants are in a listen-only mode. Following the company's presentation there will be a question-and-answer period. If you would like to ask a question during this time, invited guests may simply press star and the number one on your push button telephone keypad. I will now turn the conference over to Mr. Allen Inbring. Please go ahead sir.

Hello, I'm Allen Inbring, Director of Investor Relations at Vical. Welcome to our second quarter financial results conference call. Participating on the call today are Vijay Samant, our President and Chief Executive Officer, David Kaslow, our Chief Scientific Officer and Martha Demski our Chief Financial Officer. I will begin with a brief notice concerning projections and forecast. This call includes foward-looking statements including information regarding expectations for 2002, and for our Research & Development program that are subject to risks and uncertainties that could cause actual results to differ materially from those projected including the risks set forth in Vical's annual report on Form 10-K and Quarterly reports on form 10Q filed with the Securities and Exchange Commission. [ INAUDIBLE ] These foward-looking statements represent the company's judgment as of today. The company disclaims, however, any intent or obligation to update these forward-looking statements. Now I would like to introduce Vical's President and Chief Executive Officer Mr. Vijay Samant.

Thank you, Allen.

I'll start the call with some comments on recent events and financial results. Then we'll open the sessions to questions. I'm sure you have a lot of questions. If the time permits we may also address a few questions that were submitted in advance. Recent events, since our last conference call we have completed some important developments. First, we've provided an update at the last [INAUDIBLE] meeting on our development program for the [INAUDIBLE]. Second, we announced the [INAUDIBLE] two [new patterns] that further expand our intellectual property position. Third, we expanded the scope of our agreement with Centocore for the development of gene based cancer vaccines. Finally, we entered into two agreements in support of U.S. governments' effort to develop vaccines against potential bioterrorism threats. We'll address each of these items briefly and then review the financial results.

First, [INAUDIBLE] Allovectin-7. I will review the status of our three key Allovectin-7 trials. The phase two registration trial at the [Minneapolis] meeting, we provided an update to the interim survival data for our phase two Allovectin-7 registration trial. Based on the most recent database update the estimated median survival for all 78 patients featured in the phase two trial was 14.3 months. Of the eight patients that investigated previously reported as responders, 7 were still alive at the time of the update. Phase three registration trial, we also reported [INAUDIBLE] an overview of plans for the management of data from our phase three registration trials. Those plans are progressing as expected. We have completed the collection and audit of primary efficacy and [formed data] from this trial. The database has been locked. We have submitted to the FDA our proposed process for end point assessment and [INAUDIBLE] of the [INAUDIBLE] data by an independent group of radiologists and oncologist. We expect that the final report of the study's primary end point will be reviewed in the second half of 2002, allowing us to assess whether the data are sufficient to support filing for marketing approval.

Allovectin-7 high dose program. We [have] also reported at [INAUDIBLE] our nonregistration phase two study testing high dose Allovectin-7 in patients with end stage refractory metastatic melanoma. In the same patient population treated in our prior phase two registration trial. This trial it was dosing of up two milligrams compared to 10 micrograms in the our registration trials and for the first time allows administration in multiple tumors. The excellent safety profile of Allovectin-7 has allowed us to explore the potential for the significantly more aggressive treatment regimen. We believe this 204 dose increase and multiple tumor injection may provide improvements in efficacy. We reported at [ASCO] that the high dose phase two trial was recruiting very well and that we expected to achieve our initial enrollment target before year an end 2002.

Second, the assurance of two new patterns. We announced in June the assurance of a species pattern covering the genes based delivery of Interluken-2 for treatment of Cancer, and in July a [broad] pattern covering methods for the nonviral gene based delivery of physiologically active Polypeptides or proteins. The first is a specific patent for [IO2] delivery, which further strengthens our intellectual property in this area. The second is a broad pattern that reinforces and expands existing coverage on our core technology for gene based delivery of polypeptides and proteins. Among the most advanced applications that would be covered by this pattern are clinical programs being run by our partners at Advantis Pharma and Vascular Genetics in the field of [Angio genetics].

Part of our agreement with Centocor we announced in June that Centocor Inc. of Johnson and Johnson company has expanded its earlier license and option agreement to use our naked DNA technology to develop and commercialize certain DNA vaccines for the potential treatment of some types of cancer. We've included the up-front payment in our second quarter financial results and could receive additional milestone payments in the future. This agreement dates back to 1998, and we're pleased that Centocor has demonstrated a continuing interest in our pattern of technology. Finally, our initial ventures in support of U.S. government biodefense efforts, I would like to have a David Kaslow provide a bit more detail on the importance to Vical of these biodefense programs. David?

Thanks, Vijay. As announced earlier this month Vical has initiated in with collaboration with Ohio State University, pre-clinical studies of DNA vaccines against Anthrax. This research is being funded by a one-year small business technology transfer research grant from NIAID. Vical has also been contracted by the vaccine research center to manufacturer clinical grade supplies of an investigational DNA vaccine against the Ebola virus for initial clinical development.

So why are these programs important for Vical? First, we believe our technology can contribute to the rapid development of many of the biodefense targets of high national interest. Second, we see the Anthrax vaccine programs in particular as ideal for Vical to demonstrate proof of concept of DNA vaccines for antibody mediated profilactic vaccines. Expanding the recognized utility of DNA vaccines beyond just listing cell mediated immunity. Third, Anthrax vaccine development provides a relatively straightforward program from the basic science, the clinical trial size and designs and the regulatory approach. The protective [INAUDIBLE] to be included in the vaccine have already been identified. The mechanisms of protection have already been elucidated. The animals models required to demonstrate the effectiveness of the vaccine have already been developed. And a feasible path to market approval has already been mapped out. In short, we know what we need to do and we know how to do it.

With respect to the hemorrhagic fever viruses, such as Ebola, Dr. Gary Nables team at VRC and other investigators have demonstrated that gene-based vaccines protect the animals against lethal challenge by these pathogens. Again, the protective [imagens] have been identified and the path forward is clear. DNA vaccines either alone or in a prime boost approach appear very promising. Thus this is another opportunity to demonstrate the utility of our technology in a prime boost setting.

In summary, both the Anthrax and Ebola programs are important to us beyond the clinical application of our technology for biodefense purposes. These programs provide valuable experience to Vical in infectious disease vaccine development, in manufacturing and in regulatory affairs. These experiences will directly translate to more effective and more rapid product development of our own in-house programs and all of this can be accomplished through federal funding without a significant impact on our own cash reserves. Thus from both the scientific and the business prospective, these efforts make good sense for Vical and with that I'll turn it back to Vijay.

Thank you David for the update. Now I'll summarize our second-quarter financial results as reported yesterday. The results for the second quarter of 2002 were consistent with our forecast, we reported a net loss of $5 million for the second quarter of 2002 compared compared with a net loss of $3.3 million for the same period in 2001. The increase in net loss compared to 2Q '01 was primarily a result of a decline in investmet income reflecting significant reductions in interest rates, lower average cash balances, coupled with an increase in expenses related to expansion of Vical's Research & Development program. Results for the second quarter 2002 include a million dollar payment from [Marielle] for the exercise of additional options under the 1995 agreement for animal health vaccine and a payment from Centocor for the expansion of their license agreement related to gene based Cancer vaccines. As of June 30, 2002, we had cash and cash equivalents in marketable securities of $123 million compared with $134 million at the end of 2001, this is sufficient to support our current programs and plan new ones.

Finally forecast, we continue to conform our forecast for of net loss between $28 million and $32 million for 2002. This concludes my prepared statements . I would like to ask the operator now to field questions from the field.

Thank you, Mr. Samant. The question-and-answer session will begin at this time. If you're using a speaker phone, please pick up the handset before pressing any numbers. Should you have the a question, please press the star key and then the number 1 on your push button telephone, if you wish to withdraw your question, please press the star key and the number 3. Your question will be taken in the order it is received. Please stand by for your first question.

Hello?

Your first question comes from Eric Schmit, please state you're affiliation followed by your question.

Uh, good morning its Eric Schmit at SC Cowan Securities . Hi everyone. Vijay, I'm wondering if you could give us a little bit more detail on the expected timelines for the Allovectin phase three results and maybe you could frame it as to--- the earliest possible date that the data may be available, the latest date and the criteria that might buy us results to one and or the other of the spectrum.

I thing first of all you need to understand that we have locked the database and actually have begun some [INAUDIBLE] such [training, digital vision scans], simulation of data collection so we're prepared to make expeditiously once we receive the FDA feed back. Okay. Right now the adjudication document is in the hands of the FDA. We're in discussions with the FDA in finalizing the document. Remember this is the first time probably, I'm not sure about it, probably that a comprehensive adjudication document has been submitted to the FDA. So the FDA is very carefully reviewing it. And our understanding with the FDA is that the adjudication process will not begin until the document is approved. But we are confident based on our discussions that this is going to be done very quickly and once that is done, remember, adjudication has never been done by us before or in the fashion that we're proposing by anybody else. So our resources---our fullest resources of Vical are going to be employed to get this adjudication done very rapidly. It's a little premature for me to predict the upside or downside. It's only, it's the month, end of July almost now, so I would say no later than the end of this year. That's our guidance, Okay. The sooner the better.

Okay, It's pretty much up in the hands of the FDA at this point?

No, I think it's in the hand of the FDA to get the adjudication process approved and that should happen rapidly, that's our expectation based on our discussions with them. But then the actual adjudication process itself, remember there are 200 patients in the study. There are a lot of scans and you know we have never gone through this before. We have a team of--- structured to train the people. We have to make sure that we are away from the physical adjudication process. So we don't botch the process. It's a very systematic process, okay.

Okay, so probably several months once it's back into your hands as well.

Yes.

Okay, and then I guess my second question's for Martha. If you look at the run rate on the net loss for 2002, you would have to be ramping up spending significantly the second half of the year to even fall toward the lower end of your guidance for net losses. Are there incremental trials that you're expecting to start or any reason you expect H-2 net losses to be greater than H-1?

Well Eric, we review our forecast on an ongoing basis, and provide an update either confirming or amending the forecast at least Quarterley. And immediately upon the announcement of any event that would require a change. At this point, we haven't made any changes to our 2002 forecast since it was introduced in February.

And remember Eric, we also made a commitment to you folks that we'll be announcing two preclinical programs by the end of this year so that's going to be ramping up some spending. The adjudication process itself is an expensive process, so all those [INAUDIBLE] are factored all those expenses are ocurring in the second half of this year. The other thing is we run a pretty tight shop here at the same time so we're making sure that we spend the dollar that we have very carefully and judiciously.

And we also have some new facility costs that will be coming on board.

Yeah, particularly in new manufacturing facility.

Great, thanks a lot.

Thank you. Our next question comes from Alex Hiddle. Please state you're affiliation followed by your question.

With A.G. Edwards and my question's on the Anthrax and Ebola programs. Obviously you can't test these for efficacy in people. Is this a situation where you have this sort of two animal models and safety trials as the kind of path to approval?

Alex, this is David Kaslow, Chief Scientific Officer, absolutely, and we see this as a situation that allows us to really define that pathway to market approval and I think what you're referring to is 21CFR601.09, recently describing that two animal rule. We're exploring that in detail and it allows us the opportunity to engage in FDA and clarify that path.

David, could you for the benefit of the group explain the two animal rule is so everybody understands what the two animal rule is.

Right, this is a new rule that was just published by the FDA. It came out of both Seeber and Cedar so we believe it applies to biologics and to drugs. And it describes the method by which you can show effectiveness in animal models for those products where it would be difficult either infeasible of unethical to determine efficacy in humans. And it's a new rule, I think it's a boon to our industry to allow us to gain market approval for some innovative new products.

And basically what you have to do is show the efficacy in animal models, two animal models and then demonstrate in a small safety trial that the construct that is giving efficacy in animals is not causing any harmful effects in human beings. So you do not have to demonstrate efficacy in human beings. Nobody has got a product approved through this rule. This has just come out, but we are excited because of the fact of bioterrorism, there may be other targets which may be applicable to this two animal rule.

Right. The two animals that are most likely to be used in the Anthrax application would be the rabbit inhalation model and then a nonhuman primate inhalation model. And there've been workshops by the FDA on this so the path is really coming into focus on it.

And are there similar models on Ebola?

Yeah, Ebola would be very similar as well and this is something that Gary Nable as well as the folks at Fort Detrich have been working on. They have published actually, on protection using gene-based delivery systems in a challenged model in nonhuman primates. They've also done that in rodents as well so likely be applicable in that situation as well.

Okay. Thank you.

You're welcome.

Are there any other questions, otherwise there are some free submitted questions from the audience that I would like to take at this stage? And the first question is do you anticipate that Malaria vaccine that you're developing could be useful as a therapeutic treatment in addition to be a preventive treatment. David, do you want to take that?

Sure Vijay, you know, you know our malaria program has been focused on developing a prophylactic vaccine based on the liver stages of the parasite life cycle to provide short-term protection for travelers and military personnel against malaria parasite infections. As you probably also know, [INAUDIBLE] Malaria does not cause persistent liver infection. A therapeutic vaccine against Malaria that could actually be used after an infection is really well beyond the scope of our current program.

Thank you.

Any other questions? Operator, do we have some questions?

Yes. Your next question comes from Wilmot Kidd. Please state you're affiliation followed by a question. Mr. Kidd, your line is live.

Can you hear me?

Yes.

Central Securities Corporation. I understand the FDA is trying to develop a policy about drugs or vaccines that have less side-effects than chemo therapy but only equivalent efficacy which as far as I can tell would relate to your Allovectin, and is there anything you can, any light you can shed on the fact that the discussions might be going on at the FDA about that?

This is Vijay. I am not aware of what's going on to that respect. I can only tell you one thing based on my interaction with companies and of small and large pharmaceutical companies that the FDA is intensely focused on safety. Safety is really a very key issue for the FDA. So in clearly what you're saying is probably right, but I don't know what policy documents they're working on right now.

Thank you.

Your next question comes from Skip Cline. Please state you're affiliation followed by a question.

Yeah, Downs Capital. Hi guys, I was just curious whether the adjudication document changes any of the prior understandings that you had with the FDA on what a clinically meaningful outcome is. In other words, in the past you had that either or type of approach to what --

No, I think to answer that question. The adjudication document does not change those prior two end points. That understanding [is where] the FDA stands as of right now. You know. And there are no discussions on the two end points. [INAUDIBLE] The adjudication document, remember it is the process of how the scans are being looked at. They're looked at precommittee members. How it's looked at. The random fashion of the scans, the random fashion of the patients, who is preview to the data, how it would shield it from different sources. It's a very carefully worded document and the FDA, based on what has happened in the last few months, it wants to make sure that there are no hiding here, okay. That the data doesn't leak out or [INAUDIBLE].

That's quite good but in this discussion it's pretty clear that they're going to live up to the understanding--

There's no discussion in the adjudication document on those two end points.

Great, thanks, Vijay.

Your next comes again from Alex Hiddle. Please restate your affiliation followed by a question.

I'm still with A.G. Edwards in the last press release you gave us an update on how many patients were enrolled in the high dose Allovectin-7 trial. Can you give us an update on where that stands and when we might expect to see some data from that trial?

I think the last update we gave on it, Allen [INAUDIBLE] was in May?

Yes, [INAUDIBLE], right.

We had what, 60.

The last one I have 67 of 80 --

67 patients, we since then have not updated. Our game plan is to update in the near future, okay, where the enrollment stands. But our guidance that we have given to you in the past, it stays from the May guidance, is to get the enrollment. done before the end of the year and that it's premature to predict when the data will be shared with you but as soon as the data is mature enough we'll take the opportunity to share that with you.

Okay. Thanks.

Your next question comes from May Kim Lo. Please state you're affilliation followed by a question.

[INAUDIBLE] another question on the adjudication process. If I remember correctly, there is a point where the investigators have determined the initial response and then, of course, the committee has to determine what are those initial responses are correct, and it gets adjudicated.

Okay.

Are we at the point with the investigators now actually have determined initial response and somewhere the response rates are known?

I think to answer that question, is we really have submitted our adjudication plan to the FDA for review. Please be aware that the adjudication process is very complex and one of the key elements of the process is to ensure data integrity and a wide data bias. The adjudication process document has not yet been approved by the FDA so I can not really comment on when, how or to whom the data will unfold because that's a critical element of the adjudication process, okay.

My question is do the investigators now have determined initial responses?

The individual investigators obviously know from their 30 or whatever sites, we have 40 sites, they have -- they know what their responses on their sites are. We do not reveal at Vical at the collective responses are.

So there's no central group or place where the --

there is a third-party contractor which is bound by secrecy, the only entity that has access to the complete database, complete data. Vical has not seen the data.

Okay, thanks.

At this time there are no further questions.

I have one or two presubmitted questions from the field unless somebody from the audience has those questions. The first question was do you still intend to investigate the end licensing or partnering of some outside oncology candidates even if they're unrelated to Vical's technology.

As I've told you before we're exploring in licencing and aquisition opportunities for [INAUDIBLE] candidates consistent with our expertise and both structure and financial resources and so there's a whole but of biotechnology companies and large pharma companies. So we're competing with a lot of other companies. This is an intensive effort and it's premature to speculate what the outcome might be. Another question is would you consider supporting Vical's stock price by announcing a stock buy back program, given the right circumstances. Martha, do you want to answer that?

Basically we continue to evaluate the pros and cons of a share repurchase program on an ongoing basis.

Okay. One more question on Allovectin from the field is why has enrollment been such a problem in the Allovectin-7 head and neck clinical trials. Have you considered running any offshore trials to speed up this crucial research?

[INAUDIBLE] really, we're investigating really right now fundamentally to find out why recruitment for the head and neck cancer trial has been slow. It has something to do with our design or promoting efforts. And what the options may be for addressing the situation. However, our current effort right now is focused on getting our phase three adjudication process, our phase two [INAUDIBLE] trials going, and that's where our focus is. Any other questions?

At this time there are no further questions.

I think I want to thank all of you for participating in this conference. We hope to see you, some of you individually during the summer at one of our scheduled presentations when we're on the east coast or location near to you. This concludes our conference call today and all parties may now disconnect: thank you.