Brickell Biotech Inc (BBI) 2003 Q4 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen come 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 the conference up for questions and answers from invited participants after the presentation. I will now turn the conference over to Mr. Alan Engbring.

Hello. I'm Alan Engbring, Executive Director of Investor Relations at Vical. Welcome to our fourth-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 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 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 fourth-quarter 2003 results. These forward-looking statements represent the company's judgments as a 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 will start the call with some comments on our programs and recent progress, then we will take some questions from our callers. If time permits we may also address a few questions that were submitted in advance. I will begin now with an update on our (indiscernible) Allovectin-7 program in the metastatic melanoma. We continue to be encouraged by the results in our high dose Allovectin-7 program. As mentioned last quarter we assembled a panel of leading melanoma experts with both clinical and regulatory expertise to provide guidance on the Allovectin-7 program.

This panel reviewed the safety and efficacy data from our high dose and low-dose trials including individual patient histories of the responding high dose patients. Based on this review, we decided to seek FDA guidance and the potential for accelerated approval of Allovectin-7. We've had informal discussions with the FDA and we expect these discussions to lead to two formal End-of-Phase 2 meetings within the next few months. The first meeting is a product meeting, which will focus on manufacturing and other product related topics. The second meeting is a clinical meeting, which will focus on clinical and nonclinical data supporting the claims of efficacy and safety. Let me explain to you the overall goal of these meetings.

The first goal is to demonstrate to the FDA how our existing clinical data can support accelerated approval of Allovectin-7 for patients meeting the entry criteria for a high dose Phase II trial and to build a design of a Phase IV trial that would be required. The second goal, demonstrate to the FDA our ability to manufacture commercial quality product. Specifically in our clinical review meeting we would review the efficacy data from our high dose 208 (ph) trial, supporting data from our low-dose 205 trial, patient managers (ph) from both trials and safety data from multiple trials. As a reminder, our high dose trial completed enrollment in July of 2003.

We still have some patients receiving ongoing treatment. In preparation for the clinical End-of-Phase 2 meeting we took a snapshot in November of 2003 of the efficacy data after all enrolled patients had received two cycles of Allovectin-7 therapy. This November 2003 dataset and the supporting data I just mentioned will be the key basis of our discussions on efficacy with the FDA. In our clinical meeting with the FDA, in addition to efficacy we will review Allovectin-7's excellent safety record from multiple trials.

We are particularly encouraged by the good tolerable (indiscernible) for all the patient. Remembers at our interim data analysis the median age of patients in our high dose trial was 60, the oldest being 98. The median age of responders was 57, the oldest being 83. These are not patients who would normally be considered for chemotherapy and only one percent of the patients had (indiscernible) events of grade three or higher. Actually there was only one grade three event. As this is an open label single arm study, survival data will not be emphasized in our meeting with the FDA, however we are encouraged by the trend in the estimated median survival which is still maturing.

In this clinical meeting we intend to discuss at a conceptual level the design and endpoints of the proposed Phase IV trial. If the FDA supported a plan for accelerated approval of Allovectin-7 we will then address in a separate special protocol assessment meeting at a later date, the detailed design of the proposed Phase IV study. In the manufacturing related review meeting we will review clinical lot to lot consistency to demonstrate comparable potency for all lots used in our Phase II trial.

We will review our plans for launch release and characterization of the commercial product. We will review our plans for manufacturing Allovectin-7 in our new Pacific Center Court facility. We will review the protocol we intend to use to demonstrate comparable comparability between the current manufacturing process in our Eastgate (ph) facility to that in our new Pacific Center Court facility. Based on the outcome of these two meetings and by the end of second quarter of 2004, we expect to finalize our approach to seeking marketing approval for Allovectin-7.

We expect to review key clinical data from our November, 2003 dataset in a scientific forum in June. That completes my comments on Allovectin-7. Vaccine programs. Next I will provide a brief update on our vaccine program starting with our DNA based immunotherapeutic vaccine against CMV. Our CMV vaccine development continues to make solid progress. We have completed most of the required preclinical testing, have formulated the vaccine, have manufactured clinical supplies for our Phase I trial. Some of the country's leading transplant centers have contributed to the trial design and may participate in the upcoming CMV vaccine trials. We have also secured intellectual property rights for the selected gene sequences. I would like to have David Kaslow, our Chief Scientific Officer, briefly discuss an exciting new research finding that could enhance further development of this program.

Thank you, Vijay. Let met start with the design of our current vaccine. Our lead vaccine configuration consists of two plasmid constructs, one in coating the surface antigen, glycoprotein B, and the other a potent T-cell target, phosphoprotein 65, or PP65. These constructs have been tested individually and in combination in our own laboratories. We have verified that these immunogens elicit potent immune responses generating both antibodies and T-cell responses. We evaluated several formulations and have selected a poloxamer formulated vaccine to advance in development.

Recently we identified and tested a third known immunogen that can be manufactured and it'll elicit a potent T-cell response. We are evaluating the benefit of incorporating this third plasmid into a trivalent vaccine to determine how this might further increase the likelihood of success of our CMV immunotherapeutic product and are exploring the best way to integrate this discovery into our CMV immunotherapeutic program.

Thank you, David. I would like to comment here on the schedule regarding the CMV program. Though we made significant progress in 2003 with our CMV vaccine, unfortunately we did not achieve our original goal to begin clinical testing by the end of the year. I want you to know that we have maintained a very aggressive development schedule and have completed the majority of the required tests as planned. We're currently finishing a few of the remaining preclinical studies which should clear the path to begin clinical testing within the next few months.

In addition I'm pleased to report that we've received excellent scores on two grants submitted to the NIH related to our CMV vaccine program. These grants will fund a portion of the preclinical safety and toxicity evaluation of the CMV vaccine and allow us to develop novel essays to measure and characterize immune responses in volunteers participating in our clinical trials. We are optimistic that we should receive funding for these grants by the end of first-quarter. Next I will discuss our anthrax vaccine program. We're developing a next generation vaccine designed to provide broader protection than any of the other anthrax vaccines either on the market or in development.

Where the others target the single anthrax protein called, protective antigen or PA, our vaccine also targets the anthrax protein called lethal factor or LF. This second generation bivalent, cationic-lipid formulated vaccine is designed to provide broader protection against weaponized form of anthrax than currently approved anthrax vaccine. Preclinical data from anthrax vaccine program demonstrated complete protection of rabbits against the lethal aerosolized spore inhalation challenge at seven and a half months after vaccination. In our anthrax vaccine program, the human clinical testing originally expected to start the end of 2003, has not yet begun for two reasons.

First, we're still completing some required preclinical work, which is being supported under a three-year $5.7 million grant awarded by the NIH last July. Secondly, we have not yet received a commitment for additional government funding to support human studies, and that funding directly depends on the priorities and appropriations for biodefense research and Project BioShield. Nevertheless we remain excited about the potential for this vaccine and continue with our nonclinical development supported under the existing grant.

Let me now discuss some of the collaborative programs. Let me start off with Merck. In addition to our independent product development programs, we have licensed our technology to others who are advancing with specific applications. One of our key partner programs is Merck's HIV program, where they are developing an HIV vaccine which uses gene delivery technology as one of the several options being explored by Merck. Merck has invested substantially in this effort and is considered among the leaders in HIV vaccine development.

They have advanced through a series of Phase I trials, testing investigational HIV vaccines alone and in combination with other gene based vaccine delivery systems. We look forward to the next progress report which we expect within the next six months. Let me remind you that in August of last year we entered into an amendment of our agreement with Merck under which Merck received options to use our technology in cancer vaccines. We're pleased that we may be a part of their new initiative in oncology. As you know Merck has not traditionally been a player in oncology. Angiogenesis. We have two partners in the exciting field of angiogenesis, Aventis Pasteur is conducting a Phase II trial. It's not Aventis Pasture, it's really Aventis Pharma, which is conducting a Phase II trial in patients with peripheral vascular diseases and Corautus Genetics is preparing to start a Phase IIB trial in patients with coronary artery diseases.

The Aventis Pharma program could generate further milestone payments as it progresses and both programs would generate royalties for Vical if they are successful. In the animal health area our collaborator is Merial, a joint venture between Merck and Aventis. Merial is using our DNA delivery technology to develop and commercialize DNA vaccines to prevent infectious diseases in domesticated animals. Merial has several vaccines in various stages of clinical testing which could lead to approval by the USDA.

These programs could generate additional milestone payments and royalties to any resulting product sales. Electroperation. We're preparing to advance into clinical testing with a new program involving solid tumors. This would be a vaccine. We intend to announce a new product development program in solid tumors as an initial application of electroperation technology by the year end 2004. Aqua Health and Novartis. We expanded our opportunities in the animal health field last year by granting a non-exclusive license to Aqua Health, an affiliate of Swiss-based company, Novartis Animal Health, for use of our patented technology in a DNA vaccine against an undisclosed target.

Aqua Health is investing in a vaccine based on our DNA technology to combat diseases that affect both wild and farm raised fish. We expect an update on this program later this year. Our collaborations with the NIH Vaccine Research Center. NIH is a big partner for us. I would like to focus on our various collaborations with the Vaccine Research Center. As you know we are now in involved in several vaccine programs at the NIH. One of particular note is their vaccine for HIV. The NIH is exploring a novel approach to HIV vaccine development by targeting a highly (indiscernible) HIV envelope protein.

In addition to one or more of the internal proteins of the pathogen, most of the current DNA vaccine programs are using internal proteins of the pathogen, so the NIH protein program is using an envelope protein in addition to internal proteins. Developing the ability of the immune system to recognize and respond to HIV envelope protein would be a significant milestone in HIV vaccine research. Other collaborative DNA vaccine programs for NIH included Ebola, West Nile Virus, SARS. Let me provide you a brief status update. For Ebola we produced clinical supplies used in the initial human safety study.

That trial began in November of 2003 and the enrollment is progressing well. We would expect to see some initial data from this trial later this year. We secured rights from the NIH to proprietary gene sequences used in this vaccine, providing us with opportunity to commercialize their vaccine upon approval by the FDA. The NIH and others have made substantial progress towards a human DNA vaccine for West Nile Virus. We participated in the development and optimization of NIH's vaccine and as a result from our early preclinical studies we have shown that this vaccine protects mice.

We are further encouraged by independent tests at the CDC in which a similar DNA vaccine was shown to protect horses from West Nile Virus after a single injection. We recently secured a licensed the CDC for technology used in their vaccine and we are operating under CRADA from the NIH, giving us commercialization rights to this vaccine as well. SARS. In October we began manufacturing clinical grade supplies of a DNA vaccine against a very difficult target, the pathogen that causes severe acute respiratory syndrome, or SARS.

A trial using the supplies could begin as early as the third quarter of 2004, demonstrating the speed advantage of our technology. Also important for this type of application is the safety advantage of our technology, which allows developing, manufacturing, and evaluation of vaccine candidates without handling a potentially dangerous pathogen. If the NIH is successful in (indiscernible), our goal will be (technical difficulty) commercial rights to the resulting vaccine. Contract revenues. In addition to license and milestone payments for collaborations, we have generated revenues by providing DNA vaccines and related services to the industry, government, academic customers on a contract basis.

These contract revenues reached a new record level in 2003 and together with grant funding has generated more than $30 million on a cumulative basis over the last few years. Last year we also entered into a new contract to manufacture (indiscernible) quantities of DNA vaccines for the National Institute of Health in our new manufacturing facility, for which the NIH has financed the purchase of fermentation and purification equipment. In October of last year we received notification from the NIH its intention to place production orders under this agreement beginning mid 2004 and in Feb. of 2004 we received the initial form orders totaling approximately $6 million.

Revenue from this order will be recognized as the product is shipped. This should substantially increase our contract revenues to more than $10 million in future years, subject to annual renewal of the agreement. We are on track to begin production as scheduled and we fully intend to meet the NIH's requirements including vaccines for HIV, Ebola, West Nile and SARS. We have also manufactured a DNA vaccine for HIV which will be tested for human clinical trials in China by the International AIDS Vaccine Initiative.

Financial results. I will briefly review the financial results and then we will open the call for questions. This morning we reported a net loss of $6.9 million for the fourth quarter and $24.5 million for the full year 2003. This was in line with the low end of our forecast range for a net loss of $24 million to $28 million. The revenues of $8.1 million for the full year 2003 were up from $7 million for 2002 and were driven by record contract and grant revenues. We held the line on spending despite the steady progress in our development programs. As of December 31, we had cash and cash equivalents and marketable securities of $85 million, compared with $112 million at the end 2002 for a net cash burn of $27 million.

For 2002 we expect to continue advancing our programs with fiscal prudence and look for a net loss in the range of $26 million to $29 million. Outlook for 2004. Let me recap the milestone on which you should judge our progress for the remainder of 2004. First in our Allovectin-7 program, we expect formal End-of-Phase 2 meetings within the next few months in which we will seek to demonstrate to the FDA how our clinical and manufacturing data support accelerated approval. We intend to announce by the end of second quarter our approach to seeking marketing approval for Allovectin-7.

We also expect that key clinical data from our high dose Phase II trial will be presented at a scientific conference in June. In our CMV vaccine program we expect to begin initial human testing safety trials within the next several months. This trial will support our advance into the initial efficacy testing in the bone marrow transplant patients and would be conducted at one or more of the leading transplant centers in the United States. We are exploring the best way to integrate a new trial and vaccine into our CMV program.

Our anthrax vaccine program will continue to progress, with preclinical development under the existing NIH grant and we will monitor closely the opportunities for additional government funding to support an advance into human clinical testing. By year-end 2004 we intend to announce a new development program for solid tumors as initial application of electroperation technology. We expect our new facility to begin contract manufacturing for the NIH in the second half of the year under our bulk DNA vaccine manufacturing agreement. Timing of revenue recognition will of course be consistent with accepted accounting principles.

We are aggressively pursuing additional opportunities for products and partnerships, especially where we can identify synergies with our existing programs. We intend to announce at least one new collaboration in 2004. That concludes my prepared comments. Operator, we are now ready to open the call for our questions from our invited participants. Thank you.

Thank you. (OPERATOR INSTRUCTIONS). Eric Schmidt of SG Cowen.

Good morning. I have several questions on the Allovectin program, if I may. First, did you notice any material difference in the latest interim analysis from November versus some of the results you described to us in June at ASCO and July, as well?

That is an excellent question, however as I said in my prepared script today, we are not going to discuss the November data. We will open the data in a scientific forum in June. So that data is not -- is just very carefully monitored internally inside the company at this stage.

And then in terms of the potential willingness on the FDA's part to consider the filing based on Phase II data, I guess you mentioned one unmet medical need in older patients who would not tolerate chemotherapy. Is that principally the group to which you would target Allovectin or other populations that seem to perform well? Maybe you can or cannot go into those populations. Are there other unmet medical needs? What is going to balance the risk reward in your favor here?

First of all, there is no second line therapy available for treatment of melanoma. The first line treatment for melanoma primarily today is dacarbazine and proleukin and there is really no second line therapy and our goal is really to position Allovectin-7 as second line therapy, give people who failed those first two therapies. Obviously there will be some stratification based on our discussions with the FDA, but that is really the focus on how we want to approach it.

And I think you mentioned that you were going to potentially file based on the Phase III results, the low-dose Allovectin as well, is that right, or they would be included in the filing for -- I guess I'm not sure for purposes, given they are substantially lower than currently tested dose.

I think you need to understand that those (indiscernible) data are supportive because they are in the very similar patient populations as the two way data. Also the safety and tolerability data covers a broad range of clinical trials. So those would be primarily supportive data. The key data is the Phase -- Phase (indiscernible) trial.

Last question is, if the FDA rejects your application to file based on Phase II data or dissuades you from filing based on the Phase II data, would you still go forward with the SPA and do a formal Phase III program, or would that be open to discussion at that point?

I think it is a question that is hard to answer at this stage, because first of all we haven't had our discussions with the FDA. They have not seen the data in its fullest form. And once we get some feedback I think I will be in a better position to answer that question.

Thanks a lot.

Jon Lanfear of AG Edwards.

I also have a couple questions on the Allovectin-7 program. In regards to the end of Phase II meetings, just to clarify, you're expecting two separate meetings in next few months, so would we hear something on the results then of those meetings prior to the June ASCO meeting?

First of all to answer your question, yes, our goal is to secure two meetings, separate meetings, a clinical meeting and a manufacturing meeting because the constituents who have the expertise in FDA in those two areas are two different set of people. And you need to make sure that your manufacturing process is running consistently, because no matter how good your clinical data is, if the manufacturing data doesn't stand tall, the clinical data is of no value. So we have paid a lot of attention on our manufacturing, particularly our potency assays, our validation issues, and things of that sort. So the answer to your question is yes, our goal is to have two separate meetings. And as I have told you, our game plan is to announce our path forward as to how we're going to seek marketing approval by the end of second quarter. So that is a few months away.

One follow-up question on the vaccine program for anthrax. We had a conference call today with another company that is also waiting on potential funding from the government. Is there any indication when you might get any indication when the funding may or may not come? Are we basically looking at second half '04 type of thing?

Is a good question. It's hard to predict. It's really tied up in the bureaucracy in Washington, and you know with so many things playing in the politicians mind right now, this is not being a priority at this stage. But there will be resolution some time I expect mid this year, is what my guess is if I was to look at the crystal ball.

That sounds great. Thank you.

(OPERATOR INSTRUCTIONS)

While we're waiting for some questions there were some presubmitted questions that we want to answer in the meantime. And the first question is, does Vical believe electroperation will be an important part of its future? What clinical trials you are using electroperation -- when might? As we announced this morning, we're planning to announce our first electroperation development program in a solid tumor application by the end of this year.

We should be able to project a development schedule at that time. While we are encouraged by our preliminary work with this technology, it is too early to estimate its long-term potential to Vical. Second question is, have there been any advances with the influence of vaccines since reacquiring the rights from Merck? Does Vical still believe it can illustrate an effectively broad response across multiple strains so that we will be less likely to have to guess which vaccines to stockpile before flu season? David, do you want to answer that?

The reacquisition of rights to commercialize influenza vaccines has made our influenza product discovery effort a higher priority internally and we have an active research program in this area to determine the best way to approach both endemic, as well as pandemic flu, and have established a relevant flu challenge model in small laboratory animals. We believe a DNA based flu vaccine could provide added benefit to that provided by the currently licensed flu vaccines. However as with our other early research programs, we do not announce definitive development plans until we have decided to advance a product lead into clinical development.

Are there any other questions?

At this time I'm receiving no further questions.

Thank you all for participating. We hope to see you, some of you individually, at one of our scheduled presentations before the next conference call. Thank you.

Ladies and gentlemen, this concludes our conference for today. All parties may now disconnect.