Brickell Biotech Inc (BBI) 2003 Q3 法說會逐字稿

Good afternoon, and welcome, ladies and gentlemen, to the Vical Incorporated financial results conference call.

At this time, I would like to inform you that this conference is being recorded, and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation.

I will now turn the conference over to Mr. Alan Engbring. Please go ahead, sir.

Hello, I am Alan Engbring, Director of Investor Relations at Vical. Welcome to our third 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 forecasts.

This call includes forward-looking statements, including financial expectations and projections of progress in our research and development programs 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 Report 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 third quarter 2003 results.

These forward-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, Alan. I'll start the call with some comments and recent events, and then we'll take questions from our callers if time permits. We may also address a few questions that were submitted in advance.

First, as you know, we had some major fires sweep through a large portion of Eastern San Diego county last week. There was no damage to any Vical facilities, and our employees worked very hard to keep our operations going through this difficult period. I'm also pleased to say that none of our employees' homes are affected.

Getting to the programs now, I'll start off with Allovectin-7. Given the large unmet medical need of patients with metastatic melanoma, we continue to be encouraged by the results in our Allovectin-7 program. In the third quarter, we completed enrollment in our Phase II high-dose trial. We presented data at the May ASCO meeting for the first 91 patients in the high-dose core.

Just a quick recap of the data: 12 of the first 91 high-dose patients, or 13, 1-3%, had objective responses. This compares favorably with recently published response rates of around 10% for dacarbazine, or DTIC, in metastatic melanoma. Only one patient, or about 1%, of this initial group reported a drug-related grade 3 adverse event, demonstrating a continued excellent safety profile.

Based on an update for the same 91 patients in early July, the estimated median duration of response was at least 6.4 months, with 7 of the 12 responders still progression-free. And all the 12 responders were still alive in July.

After careful review of these data and data from our early low-dose trial, we concluded that Allovectin-7 has the potential to offer a well-tolerated alternative for patients with stage III or IV melanoma who have few other treatment options. We, therefore, assembled a five-member panel of leading oncologists with both clinical and regulatory expertise to provide objective guidance. This panel reviewed the data from our high-dose and low-dose Allovectin-7 trials, including individual patient histories of the responding high-dose patients.

Based on this total review, the panel concurred with our decision to seek FDA guidance for an accelerated approval at the end of Phase II meeting. This guidance on accelerated approval will drive a decision how to proceed with this program, and we expect to have our end of Phase II meeting in the first half of 2004.

Next to the vaccine programs. First, CMV. Our CMV vaccine is progressing well in preclinical testing, and we continue to work towards our goal to initiate Phase I clinical testing of the vaccine in human subjects by year-end 2003. Our confidence in this program is based on, one, a well-characterized gene that encodes highly immunogenic proteins linked to protective antibody and cellular immune responses, and two, the proven ability of our technology to elicit both antibody and cellular immune responses without the safety concerns that conventional vaccine approaches pose for immunocompromised patients.

Our CMV vaccine development continues to make solid progress. As we have noted in the past, we verified in our own laboratories that the formulated delivery of two selected CMV sequences elicits potent antibody and T cell responses in animal studies. We have now completed our preclinical safety studies in animals and the manufacturing of clinical materials.

We have also secured the intellectual property rights to these selected gene sequences. We have been working with three leading transplant centers in preparation for a Phase I human trial which we intend to begin by year-end 2003. We also have worked with clinical centers to design the initial proof of concept trials in bone marrow transplant patients, and we remain on track to advance the CMV program from concept to initial human safety and immunogenicity trials within 24 months.

Next, anthrax. In our anthrax program we are actively developing a next-generation vaccine designed to provide broader protection than any of the other anthrax vaccine, either on the market or in development. Where the other target -- where the other vaccines target single anthrax protein called Protective Antigen, or PA, our vaccine targets both PA and Lethal Factor, or LF.

During the third quarter of 2003 we presented preclinical data from our anthrax vaccine program at several scientific conferences, demonstrating long-term post vaccination protection of rabbits against an aerosolized spore inhalation challenge.

David Kaslow, can you remind us which conferences those were and summarize the data for us, please?

Sure, I'd be glad to, Vijay.

We have presented this important update of our anthrax data at a mix of venues, including ICAAC in Chicago, BioPhex in San Jose, and the World Vaccine Congress in Lyon, France.

In the original experiment, the data from which were presented at the ASM meeting in Baltimore, we tested the protection of our vaccine and the currently licensed vaccine AVA, several weeks after the last vaccination of each. These rabbits were then challenged with anthrax by having them inhale aerosolized spores. All of the 17 control animals died within two to four days. Both our vaccine and AVA provided complete protection with no sign of disease among any of these animals.

The update presented in the third quarter was based on a group of rabbits that were not immediately challenged with anthrax spores, rather we simply followed their antibody responses for 7 1/2 months after the last vaccination, and we found that the antibody titers were still high. We then challenged these rabbits along with a group of control rabbits.

Again, we found that all of our vaccinated rabbits were completely and solidly protected, whereas all the control rabbits succumbed. These animal efficacy data on the duration of immunity are quite compelling as we advance towards our initial human safety studies.

Thank you, David.

Our progress with our anthrax vaccine program also includes the recent exclusive license from Ohio State University to allow use of their proprietary technology in our vaccine. In addition, we received nearly $6 million SBIR grant in July, which is supporting much of our preclinical development cost. As we have stated before, our continued development of this anthrax vaccine is contingent upon continued government funding. They're advancing well in this program, we expect to begin clinical testing within the next few months.

Let me comment on some of the other vaccine efforts. Beyond our internal programs, we are also collaborating on several vaccine initiatives. The vaccine research center of the National Institute of Health has become a cornerstone in our vaccine development efforts, both as a customer for contract services, and as a collaborator on specific vaccine programs. We continue to manufacture Ebola and HIV vaccines for the VRC under contractive ordered in July of last year.

In July of this year, we received an order to provide the VRC with clinical-grade supplies of an investigational DNA vaccine against West Nile Virus. Let me comment a little bit about WNV.

West Nile Virus is a member of flavivirus family which includes the viruses responsible for Japanese encephalitis and dengue, along with several other mosquito-born diseases. If our approach with West Nile works, it should be applicable to these closely related diseases as well.

There has been a substantial amount of progress towards the DNA vaccine for this disease, both by VRC and others. For example, highly immunogenic gene sequences have been identified, and a DNA vaccine construct based on these sequences have been tested by the CDC and have shown prosecution in horses after a single injection. If the VRC successfully develops this vaccine for humans, it's our goal to commercialize this product. In October of 2003, we obtained an option to secure exclusive commercialization rights for the West Nile Virus vaccine under a cooperative research and development agreement with the NIH.

SARS. In October, the NIH chose our DNA vaccine technology once again. This time to tackle a very difficult target, the pathogen that causes the severe acute respiratory syndrome, or SARS. In this latest expansion of our manufacturing agreement, the VRC ordered clinical-grade supplies of an investigational vaccine against SARS. Our technology is well-suited to rapid development and evaluation of vaccine candidates without handling this potentially dangerous pathogen. If the NIH is successful in its efforts, our goal will be to obtain commercial rights to this resulting vaccine.

Let me quickly move to our contract services business. In May, we announced a contract to manufacture bulk DNA vaccines for the VRC in our manufacturing facility, for which the VRC is financing the purchase of fermentation and purification equipment. Under this agreement we are guaranteed minimum annual production orders beginning 2004. In October, of this year, we received notification under this agreement that the VRC intends to place production orders beginning mid-2004.

Aqua Health. We announced last week we granted a nonexclusive license for use in Canada to Aqua Health, an affiliate of Swiss-based company Novartis Animal Health, for use of our patented gene delivery technology in a vaccine against an undisclosed target. Aqua Health is investigating a vaccine, based on our DNA technology, to combat diseases that affect both wild and farm-raised fish. While we are not at liberty to disclose the target we can say the initial data suggests that the vaccine and the development is highly effective.

Genetronics. Also in October 2003 we entered into an agreement with Genetronics Biomedical Corporation giving us an option to a worldwide exclusive license to use Genetronics' proprietary electroporation technology in combination with our DNA delivery technology for undisclosed targets.

Merck. During the second quarter, Merck & Company expanded some long-standing infectious disease vaccine license from Vical to include options for three cancer vaccine targets, while retaining rights to vaccines for HIV, Hep-C and Hep-B. We expanded our infectious disease portfolio by reacquiring the rights to other targets previously licensed to Merck. This is the first foray by Merck into cancer.

Let me recount some of our priorities for the next several months. I just wanted to provide you a brief update, some of our key programs in our partners, but the priorities for the next few months are going to be very important, because we have a number of things on our plate.

Our resources now are completely focused on collecting the Allovectin-7 data needed for an end of Phase II meeting with the FDA. That's our number one priority. Second, we are committed to advancing a CMV vaccine into clinical testing by year-end 2003. Third, our anthrax vaccine is moving forward, and we expect to begin clinical testing within next few months. Finally, we intend to supply the NIH, the investigational vaccines that were ordered for Ebola, West Nile, and SARS. In addition, we expect our new facility to begin production runs next year.

With that, I'll move on to the financials. The financial results for the third quarter. I'll briefly review the financial highlights before we open the call for questions.

This morning we reported a net loss of $3.6 million for the third quarter, and a $17.5 million for the first nine months of 2003. This is consistent with our forecast range for the full year for a net loss of $24 to $28 million. Revenues of $4.9 million in the third quarter of 2003 were notably higher than revenues in the third quarter of 2002.

As we projected in our call last quarter, the increase reflects the reflect the timing of revenue recognition, in particular for $2.4 million of contract services work that was completed in the first half of 2003, and recognized as we reached the contract milestones in the third quarter of this year. We also recognized approximately $1.9 million of revenue in the third quarter under the SBIR grant for our anthrax vaccine program.

As of September 30, we had cash, cash equivalents, and marketable securities of $93 million, compared with $112 million at the end of 2002.

This concludes my prepared comments. Operator, we are now ready to open the call for questions from our invited participants.

Thank you, sir.

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 a question, please press star 1 on your push button telephone. If you wish to withdraw your question, please press star two. Your questions will be taken in the order that they are received. Please stand by for your first question.

Go ahead.

Our first question comes from Alex Hittle with A.G. Edwards. Please state your question.

Good morning. I've got a question on the CMV trial that you're doing. Are you starting right out in actual patients or are you going to start in healthy?

It's going to be in healthy volunteers. David, do you want to comment on that?

Right. In our discussions with the FDA, they requested that we started in healthy volunteers, just a classic Phase I trial.

To gather safety and immunogenicity data.

Right. Before proceeding into donors and recipients.

So, even though you've got the donor sites lined up, that would really be for a sort of next-phase of the trials?

Right. In fact, we plan on running the Phase I trial in those transplant sites so that they're used to using our vaccine, et cetera, et cetera, and we can move rapidly into real donors. So the healthy volunteers will be recruited from those transplant center sites.

Okay. And if I may ask one more here? Can you explain how the transition from the government to you folks securing exclusive commercialization rights works in West Nile, and, potentially, you know, what you'd need to do for SARS? Is there a payment that you need to make? Or how does that happen?

Well, those exclusive rights come with that CRADA agreement, alright? And so they are negotiated through the CRADA, that's Cooperative Research and Development Agreement mechanism.

And basically, under the CRADA agreement, the intellectual property as it relates to, specifically, this pathogen, the work that he have done, and the work that they're doing is pooled together.

And the license rights are pretty reasonable. The NIH license rights are not as prohibitive as you would be from a third party, such as a large pharmaceutical company or another biotech company. They are very reasonable. And the nonexclusive are even less expensive to get.

And so you're confident if you sought them you could get the rights for SARS, as well?

If you take our track record on West Nile, and the fact that the core technology that they are using is our technology, I think we'll be one of the first candidates they would like to work with.

Okay.

Because it's our core technology they'd be using. So, the answer to that question is yes.

Yes.Okay.

And there is some advantage to us actually being the manufacturer of the vaccine product that they're using. In other words, we have the master cell banks, et cetera, et cetera.

They're tied to us because any change, if somebody decides to make a change in biologicals, sometimes you have to start the clock all over again.

Okay.

So, our product is going to be going into the clinic in the preclinical testing. It's hard for them to go to a third party. And our relationship with them is really superb.

Very good. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1 at this time.

There are a few questions that were presubmitted, and I'll cover those.

The first question was: What is the status of the Aventis Gencell PAD trial?

The information released at the teleconference last year indicated that Aventis has completed its Phase I multicenter trial at varying single doses in patients with peripheral occlusive diseases. No serious adverse events were noted during the study among the 15 patients available for follow-up. Significant decrease in rest pain was noted, and all the 9 patients with ulcers experienced some healing. A Phase II placebo control trial is now started. So that program is progressing well .

The factor, by the way, that they're using, angiogenic growth factor that they're using in that trial in the plasmid FGF-1, they're publicly disclosed right now. So that should be known, as opposed to Corautus, which is using VEGF-2.

Second question is: There hasn't been any news about poloxamers that Vical owns the rights to. Are you still excited about the potential for dramatically increasing DNA vaccine immune responses? When might we see their use in clinical trials?

First of all, we remain excited about the potential for poloxamers, particularly with DNA applications. Our CMV vaccine is formulated with poloxamers and our safety and immunogenicity testing with our CMV vaccine program will begin soon. So, that was one of the questions that was presubmitted.

The third question is: Do you still have plans to combine Leuvectin and Allovectin-7 in clinical trials?

The potential to combine these two immunotherapeutic agents is intriguing, because each is based on different mechanism of action. However, our current priority, as I said today in the conference call, is to pursue accelerated approval of Allovectin-7, and bring this product to the market. I mean, that's really the goal.

Any other questions?

Ladies and gentlemen, as a final reminder should you have a question, please press star 1 at this time.

If there are no other questions, I want to thank all of you, and we look forward to seeing some of you individually in the near future or at the next quarter's conference call. Thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.