Brickell Biotech Inc (BBI) 2004 Q1 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Vical, Inc. financial results conference call. At this time I would like to inform you 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 first-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 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 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 2004 results. These forward-looking statements represent the company's judgments 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. We will start the call with some comments on our programs and recent progress. Then we will take questions from our callers. If time permits, we may also address a few questions that were submitted in advance. I know a lot of you have questions on melanoma and Allovectin-7. David Kaslow will be dealing with that portion of the presentation, but it is my desire that we keep our focus on the Allovectin-7 program as opposed to other people's programs.

We will begin with an update on our high-dose Allovectin-7 program in metastatic melanoma. As we projected in our last conference call, we have completed our scheduled End-of-Phase II meetings with the FDA for Allovectin-7, and have received detailed guidance from those meetings. We are pleased with the guidance on the opportunity to pursue market approval and help address the unmet medical need for patients with metastatic melanoma. Dr. David Kaslow led this effort with the FDA, and I'll ask him to provide some comments on the key conclusions and next steps of this program. David?

Thank you, Vijay. I believe it is important to start by pointing out that the guidance we received at our End-of-Phase II meetings was consistent with the agency's position at the latest ODAC. Specifically that although overall survival is an unambiguous clinical endpoint, market approval could be based on other efficacy endpoints, as long as the new therapy has a convincing effect that is adequately characterized and clinically relevant. For Allovectin-7, the prospectively defined surrogate endpoint could be a durable response, defined as a meaningful response rate with a reasonable duration of response. Allovectin-7 has the potential to meet such an endpoint.

I believe it is also important to point out that Vical, our clinical expert panel which includes Dr. John Kirkwood, a leading melanoma expert and opinion leader who participated in the End-of-Phase II meetings, and FDA clearly share a common goal, addressing the continuing unmet medical need for effective therapies in treatment of patients with metastatic melanoma. In that context, I will briefly review the highlights of the End-of-Phase II meetings and the specific tasks that need to be accomplished next.

To start, we prepared extensively for these meetings and provided detailed backgrounders (ph) that were well-received. In fact, the originally scheduled two-hour product meeting, which was our first meeting and which lasted about half that time, went particularly well. A high level 4-point summary of that meeting is as follows. First, we have demonstrated lot-to-lot consistency of our low-dose and high-dose Phase II clinical materials, which means that we can reproducibly manufacture this product. Second, no major issues were identified for our commercial lot release and product characterization plans. Third, our general plan for demonstrating comparability between clinical scale and commercial scale manufacturing was acceptable. Fourth, we agreed to a detailed review at a later date of the operations of our new commercial scale multiproduct facility.

Our End-of-Phase II clinical review meeting also provided clear guidance. First, with respect to safety, the agency advised that the product Allovectin-7 appears to be safe in patients who receive different doses of the product. However, because our experience with high-dose product is limited to 127 patients, the safety database would need to be expanded beyond those patients in the current high-dose Phase II trial to determine the safety profile required for licensure of Allovectin-7. The sample size for demonstrating efficacy in a high-dose registration trial would likely be sufficient to satisfy accrual for determining the safety profile required for licensure of the high dose.

With respect to efficacy, we were pleased that the agency indicated a willingness to accept meaningful response rate with a reasonable duration of response as the surrogate endpoint of efficacy.

David, if I interrupt you for a minute, could you elaborate a little bit what you mean by meaningful response rate and reasonable duration response, just for clarity of the audience?

Basically, what it means, we have in the same ballpark as the currently licensed therapies for metastatic melanoma.

Furthermore, we were pleased that when we noted that a trial having survival as an endpoint could take many years to complete, that FDA responded that durable response could be an acceptable primary endpoint. The agency also provided guidance that a primary endpoint could be a meaningful response rate with a reasonable duration of response in at least 25 responders. Subsequent to the End-of-Phase II meeting, we continue to engage Seeber (ph) as we design a registration trial with high-dose Allovectin-7 for a defined target population of patients with metastatic melanoma. The trial design would include an interim analysis that could provide the basis for seeking approval before trial completion. Of course, the detailed protocol and exact endpoints for this trial are subject to FDA concurrence. As such, we plan to review the design of the registration trial with FDA through a special protocol assessment, which we intend to complete in the second half of 2004. Our clinical expert panel, championed by Dr. Kirkwood, will assist us in this process.

In conclusion, we have had two very productive End-of-Phase II meetings with FDA. We have an ongoing dialogue on the design of a registration trial that has a very reasonable primary endpoint, and we are working toward a special protocol assessment. And we look forward to presenting the safety and efficacy data from the high-dose Phase II trial at two highly respected scientific forums. With that, I will turn the call back to Vijay.

Thank you, David. I think that summarizes very well the status of our Allovectin-7 program and the thought process that is driving it forward. At this point, I would like to provide a brief reminder of the unaudited data that we presented at last year's ASCO meeting. I know you guys have heard this data, but I just wanted to make sure I recap the data so it brings a little bit of clarity in terms of the recent events. The data that I am going to discuss is only in the first 91 patients. Just as a reminder, David's recent meeting with the FDA, the data that we presented to the FDA was much more complete, which had an update to the end of November of 2003, and our goal is to present that data in its complete form in June again. But the interim data on the first 91 patients, we had 12 patients that had objective responses consisting of 2 complete responders and 10 partial responders. As of July, 2003, the estimated median duration response was at least 6.4 months, with some of the 12 responders still progression free.

As David mentioned earlier, our future trials will expand our safety database. However, the data as of July, the safety profile and the study was excellent with only one drug-related Grade III adverse event in the first 91 patients, and this compares favorably to the currently licensed treatments. Our End-of-Phase II clinical review meeting was based in large part on the November, 2003 safety and efficacy data from the full 127 patient high-dose cohort in our high-dose Phase II study, and we look forward to presenting a summary of these data in early June, 2004 at the meeting of the American Society of Clinical Oncology, ASCO, and the American Society of Gene Therapy.

Next I'll go on to the vaccine programs, particularly our CMV program. In the first quarter of 2004, we achieved two major milestones with our CMV vaccine. In early March, we announced notification of funding those two grants from the NIH of approximately $1 million for research and development related to our CMV vaccine. This funding has supported some of our preclinical studies and is supporting development of specific immunoassays to measure and characterize the immune responses in our human trials. We've established appropriate assays for our initial trial and are prepared to analyze these samples.

In late March we announced the initiation of a Phase I clinical trial for our Bioavail and CMV vaccine. This trial is an open-label randomized dose escalation study with 34 healthy subjects in four groups. The randomization is designed to assure uniformity of CMV CO negative and CO positive subjects at each of the dosing levels. We have now a completed enrollment of 8 volunteers, 4 in each CO status groups in the first stage of this trial. This initial Phase I trial tests the vaccine for safety and immunogenicity in preparation for future clinical trials in transplantations.

Anthrax. In our anthrax vaccine program, we are developing a second generation bivalent cationic-lipid formulation anthrax vaccine designed to provide broader protection against anthrax than the currently approved anthrax vaccine. Preclinical data from the anthrax vaccine program demonstrated complete protection of rabbits at 7.5 months post-vaccination against a lethal aerosolized spore inhalation challenge. Non-clinical development of the Anthrax vaccine is being supported by a 3-year $5.7 million NIH grant awarded in July of 2003. All preclinical testing has now been completed. We will proceed with the human clinical testing of anthrax vaccine as soon as we secure a commitment for additional government funding. We are working very closely with the NIH to secure this funding in the near future.

Merck. I would like to remind you our HIV vaccine program with Merck which continues in Phase I testing. We expect an update on that program from Merck in the second half of 2004. You may also recall that Merck required options on several cancer vaccine targets last year. We are pleased that our technology is included in this new focus area at Merck.

The NIH Vaccine Research Center, as you know, we are involved in several vaccine programs at the National Institute of Health, and one 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 region in addition to one or more of the pathogen's 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. The NIH reported encouraging data from this program at the Keystone HIV Conference in mid-April. Preliminary data from human testing of the combination vaccine yielded a measurable T-cell response notably against the HIV analog proteins.

Our collaborative DNA vaccine programs with the NIH included Bola, which began human clinical testing in late 2003. West Nile Virus and SARS programs are advancing through preclinical development and could enter human clinical testing in 2004. I remind you that these are NIH funded programs and Vical's commercialization rights under (indiscernible) and licenses for some of these targets.

Before concluding the call, I would like to extend thanks to Martha Demski, our long-standing Chief Financial Officer, for the valuable service she has provided to the company over the last 15 years. Last month Martha announced her plans to step down for personal reasons effective June 1. I know her immediate plans for a sabbatical includes some travel and spending a lot more time with her family. We wish her the best as she moves into this new phase of her life.

Before we open the call for questions, for one last time we are going to ask Martha to review our financial results for the first quarter of 2004.

Thank you, Vijay. This morning we reported a net loss of $9.1 million for the first quarter of 2004, compared with a net loss of $7 million for the first quarter last year. The increase in net loss reflected spending for the company's infectious disease vaccine program, lower investment income, and an accrual for settlement of disputed licensed payments. As of March 31st, we had cash, cash equivalents, and marketable securities of $94 million, compared with $85 million at the end of 2003. The increase in cash was a result of the $17.3 million of net proceeds from our registered direct placement of 3.4 million shares of common stock at the end of March, partially offset by the cash burn during the first quarter.

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

Thank you. (OPERATOR INSTRUCTIONS) Eric Schmidt from S.G. Cowen.

Good morning. David, a question on Allovectin development and the next stages. Did you reach any agreement with the FDA on whether the next trial looking at response rate and durable responses will have to be controlled and, if so, what the control agent might be?

We did not reach agreement with the design of the trial, and we will reach agreement through this special protocol assessment.

So you would conduct a control trial if that's what the agency asks for?

The answer to that question is yes. It will be a control trial. The level of randomization in that control trial could be 2 to 1 or -- I'm just giving you the directional where it could be and what the exact (indiscernible) agent is something that we need to discuss with (indiscernible) so that we can recruit this trial in a speedy way.

Okay. And one of the negatives that was raised by the recent panel meeting for the competing melanoma product was its safety profile. Vijay, you mentioned you've seen only a single Phase III -- sorry, a single Grade III adverse event in 91 patients. How do you think Allovectin's profile matches up versus what we saw earlier this week from the competition?

First of all, as I told you at the very beginning of this conference call, the objective here is not to discuss other people's programs. But I can tell you based on our experience with low-dose where we have sufficiently large database, that Allovectin-7 in the low-dose which is I guess, what, 250, 300 patients, compares very favorably with Proleukin (indiscernible), okay? We right now only have, as I told you, 127 patients in the study. We are only so far, as of July one Grade III event. And if this profile continued for a large number of patients, it would be far superior to the currently approved therapies.

Okay, great. Thanks a lot.

Alex Hittle from AG Edwards.

Good morning. I also have some questions on Allovectin-7, and in particular what is mentioned in the press release here about a selected group of patients. You did provide some subset type data in conjunction with your presentation at ASCO last year about patients who had received multiple courses of therapy and patients with single injectable tumors. Are you headed in that direction as far as enrollment criteria for the Phase III you're thinking about?

I think a selected group of patients basically is consistent with what we have done. We're not going to include patients who have brain mix (ph) and liver mix (ph). Those are not the patients -- those were not included in our prior trial, and those patients are out of the study. And the standard metastatic melanoma definition, there should be injectable lesions in the patients of that sort. Again, nothing drastically different from what we have done in the past.

I think defining what prior therapy these patients had before they enrolled would be important.

Okay, great, thank you. And if I may, one other question. Could you walk us through your dispute with Worf (ph)?

Let me tell you, the dispute with Worf -- first of all, Worf is a co-inventor of this technology with us, okay. The original agreements which were of this co-invention and the licensing arrangements that we had with Worf were done several years ago before I came into this company. There was some level of ambiguity that led to the dispute. As a result of the settlement, Worf has been a great partner with us over the years. We have cleared those ambiguities, so there are some financial settlements related to the clearance of those ambiguities, but the result of that is there is clarity in terms of who gets what, and it is a win-win both for Worf and us and our shareholders, because there's complete clarity in terms of how we go forward from here.

So it's basically settled. You've taken a little bit of a charge here. Going forward are we going to see additional charges, or is it going to show up instead in royalties, those kind of things?

No, I don't think you'll see any -- without getting into the details of the amendment, you're not going to see any more charges. I think we got what we wanted out of it and they got what they wanted out of it. It was win-win settlement.

Very good, thank you.

(OPERATOR INSTRUCTIONS)

If there are no questions, I will answer one or two of the pre- submitted questions, just to kind of clear some of the air. We had several people ask us about the rationale and timing of our recent registered direct offering of common stock. Most were wondering why we needed additional capital at all and why we chose to do this offering at a time when the outcome of Allovectin-7 in the Phase II meeting was unknown. This was a great question and I have answered this question for a number of people who have actually called me one-on-one, but I thought just to make sure everybody has the same answer. Regarding the need for additional capital, we have a number of opportunities to apply advances in our technology and expand our product pipeline. As you know, David is here almost 2.5 years now, and after David's arrival we actually took the technology a couple of notches above from where it was both, both in the formulation side in terms of the design of the platform itself. However, things like Allovectin-7 are our first-generation technology, so with this advancement of our platform there is a lot of opportunities to go and test out these advances. And to do this, which includes our own research projects and development, in-licensing or acquiring products in current development or other potential collaborative efforts, all of this requires money.

And these opportunities, if we were to pursue them, would be above and beyond the current development programs and, therefore, would be outside the scope of our planned capital and cash utilization. The last thing I want to do is announce a program and then not be able to take it at a very important proof of concept stage. Our goal is if you're not going to announce a program, Program X, then I've got to be able to tell you that I can take the program to a proof of concept stage. And without this additional funding, we would not have been able to comfortably pursue any of these other programs. So we felt a need to raise additional capital to expand the pipeline for the company's future growth. Expand the pipeline, remember that; that is our goal.

Regarding the timing of the offering, we filed our shelf registration in August of 2002 in anticipation of a receptive market. That shelf registration became effective in December 3, 2003. We watched the market very closely to (indiscernible) the best window of opportunity to pursue an initial financing on the shelf registration. Together with our financial advisors, we (indiscernible) in mid-March that the opportunity had arrived based on some of the interest that some of the investors had shown in us. While the Allovectin-7 program was certainly ongoing throughout that same time period, the status of that program was not a factor in the timing of the offering.

As with all our past offerings, the timing is simply based on market opportunity. Let me remind you that we have used less than $20 million of the $50 million covenant under our shelf registration. That leaves a potential of $30 million for future offerings. We will continue to monitor the market for additional appropriate opportunity. That is very important. Any other questions?

(OPERATOR INSTRUCTIONS)

There is another pre-submitted question, and I will just quickly, briefly go over this. Could you please provide us an update on your collaborative programs? We did not do that in this call. We have 11 programs altogether, 3 independent and 8 partnered. The 3 independent ones are Allovectin-7, CMV, and anthrax. The 8 partnered programs if I was to quickly, briefly touch on each of them, we have 2 angiogenesis programs. One is with Corautus which is based on VEGF-2. That's for coronary artery diseases. That is going enter Phase II(b) this year. FGF-1 is another angiogenesis program for PAD. With Aventis Pharma there are 2 Phase II trials going on. We should get an update by the end of the year on those two programs.

We have a DNA vaccine program with Narial (ph) in the animal health area. There are number of vaccines which are in field trials, and we should hear an update by the end of the year on those programs. We have a fish vaccine with Novartis Aqua Health, which we should get a bid in the fourth quarter of this year. We have three programs with NIH, actually 4; E-Bola, West Nile, SARS, and HIV. Then we have collaborative programs with Merck on HIV, which I told you would get updated by the end of the year, hopefully. We also have a cancer option. Hopefully, they will exercise that option. So that is really the update, and as I told you all before, on all our programs we stand to collect high single-digit milestones, high single-digit royalties and milestones, except the animal health programs where the royalties are in mid single digits.

That brings me to the end of my formal Q&A session unless somebody has any other questions. If not, we will see you folks soon or others will catch up with you at the next conference call in September, October, whatever that date is. Thank you.

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