Brickell Biotech Inc (BBI) 2004 Q3 法說會逐字稿

Welcome, ladies and gentlemen, to the Vical Inc. 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 third-quarter 2004 financial results conference call. Participating on the call today are Mr. Vijay Samant, our President and Chief Executive Officer; Ms. Jill Church, our Chief Financial Officer; and Dr. David Kaslow, our Chief Scientific 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 third-quarter 2004 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, and good morning to all of you. We'll start an update on our programs and recent progress, then we'll take questions from our callers. If time permits we may also address a few questions that were submitted in advance. We'll begin with an update on our high dose Allovectin-7 program in metastatic melanoma.

During the second quarter we presented a summary of interim efficacy and safety data from a high dose Phase II trial at the AFCO (ph) meeting in June. These data were a snapshot as of November 2003 and were the basis of our end of Phase II meeting with the FDA.

During the third quarter of this year we completed data collection and (indiscernible) database for this trial. We are pleased that our audited data from the high dose Allovectin study have been accepted for presentation later this week at the Annual Meeting of the International Society for Biological Therapy of Cancer. This update will include an update on safety, response rate, median duration response and median survival. David, what's the exact date when this is going to be?

Dr. Rene Gonzalez, University of Colorado, is going to present the poster on the 5th of November, so on Friday.

On Friday -- so, you're just going to have to wait until Friday to look at all the new data. Based on the guidance we received in our end of Phase II meeting, we're designing a registration trial with high dose Allovectin-7 for certain patients with metastatic melanoma. We're in active discussions with the FDA and we expect to complete a special protocol assessment by the end of the year. The outcome of the SPA will be a significant factor in our discussions with potential partners for the further development and commercialization of Allovectin-7.

Next I will provide a brief update on our independent vaccine programs starting with our DNA based Immunotherapeutic vaccine against CMV. During the third quarter we started a Phase I trial with our three component vaccine candidate for CMV. Our two component vaccine candidate started Phase I testing in March. The third component in the trial (indiscernible) vaccine (indiscernible) is a highly immunogenic IE1 gene product. We established safety and immunogenicity of both vaccine candidates in laboratory animals and are now evaluating the safety and immunogenicity of both vaccine candidates in humans.

Based on the data we'll select one of the candidates to move forward. Over the last weekend we presented the initial safety data from the two component vaccine trial at (indiscernible) conference in Washington. This interim data showed the vaccine to be safe and well tolerated. We expect immunogenicity data to become available from this trial in the first half of 2005.

Anthrax, preclinical data from our anthrax vaccine program were published in this September and the preceding with the National Academy of Sciences. In July we started a Phase I trial at two NIAID funded vaccine treatment evaluation units, testing the vaccine in healthy adult volunteers for safety and immuno responses. We expect data in the first half of 2005. Success in this trial could lead to larger trials, support marketing approval under the FDA's 2 Animal Rule. As we have said from the inception that we'll continue the development of the anthrax program only if we are successful in obtaining additional government funding.

Collaborative programs, our partnered programs offer us additional opportunities to apply our technology and generate future revenue streams. Several of these programs achieved progress during this current quarter. Corautus Genetics is a licensee for gene-based delivery of VEGF-2, an angiogenic growth factor to promote the localized growth of blood vessels as a treatment for severe cardiovascular disease.

In September Corautus announced the initiation of a Phase IIb clinical trial. Our other angiogenesis partner, Gencell, a subsidiary of Aventis Pharma, is conducting two Phase II trials in Europe and the United States. We expect to see results from one of these trials in 2005. On the vaccine side, the National Institutes of Health is applying a plasma DNA technology for a range of infectious diseases. We have also manufactured the vaccine for all these programs in our manufacturing facility and hold certain commercialization rights for several of these programs.

A quick update, the DNA vaccine for Ebola began human safety testing in November 2003 and enrollment in this trial has now been completed. Initial data from this study could be available in the coming months with potential approval under FDA's Animal Rule and potential funding of the project (indiscernible), this program could advance quickly. We hold a license from NIH to commercialization (indiscernible). A review article in the September 2004 issue of Lancets (ph) infectious diseases identified West Nile Virus as a major public health issue and stressed an urgent need to development both treatment and prevention counter measures.

This disease continues to spread across the United States. We had manufactured initial clinical supplies of this vaccine for the NIH. In a testimony before a subcommittee of the U.S. House of Representatives the director of NIAID stated that this vaccine is expected to advance into human testing in early 2005. We have also manufactured clinical supplies of a SARS vaccine for the NIH and that program could advance into human testing in the near future.

The NIH is among several organizations using our technology for the development of an HIV vaccine. Both the NIH and Merck have (indiscernible) a vaccine for HIV in Phase I human testing. Others such as the International AIDS Vaccine Initiative and several academic research centers could advance to human testing in the coming months. Several of these programs could generate data next year.

Last week we exercised an option to establish an exclusive worldwide licensing and supply agreement with Genetronics to use their Electroporation technology for specified applications. Our initial product application is for the delivery of gene encoding (indiscernible) directly into solid tumors and a first trial with target melanoma. This is where we have the greatest experience. I would like Dr. David Kaslow, our Chief Scientific Officer, to share some additional information on this program. David?

In our laboratory animal studies we've confronted a marked enhancement in gene expression achieved by Electroporation treatment after administration of interleukins-2 plasma and DNA. We carefully considered a broad range of product opportunities to apply this unique gene delivery approach. We selected IL-2 treatment in melanoma for several reasons.

First, Interleukin has already proven affectatious in humans and is a licensed first line treatment of metastatic melanoma. However, its use when delivered systemically as a protein is limited by serious adverse events even in the healthiest of patients. Greater than 90 percent of patients are unable to complete a full round of therapy.

Second, we have shown repeatedly in laboratory animals that treatment with IL-2 plasmans followed by Electroporation not only shrink tumors, but provide tumor free survival in the majority of animals treated.

Third, this program takes advantage of our preclinical and clinical work and manufacturing experience with the human IL-2 plasman DNA as part of our former (indiscernible) program.

Fourth, treatment of readily accessible tumors, in this case skin or readily assessable node lesions (ph) is the fastest and least expensive way for us to investigate the value of this enhancing technology in humans. We also believe that the use of novel technologies will face potentially lower regulatory hurdles in a cancer setting where the serious unmeant need favorably affects the risk/benefit ratio. Regulatory experience in the cancer field can facilitate applications in the infectious disease area where we already have licensed initial rights for HIV.

Finally, as Vijay noted earlier, we have developed significant expertise and a great network of investigators in the melanoma field through our development of Allovectin-7. And although we are initially pursuing proof of concept in the setting of melanoma, our commercial rights in this area apply to IL-2 treatment of any solid tumor. We intend to begin a dose escalation Phase I human trial with IL-2 Electroporation in 2005 in certain patients with metastatic melanoma.

With that I'll turn back to you, Vijay.

Thank you, David. At this time I would ask Jill Church, our new CFO, to provide a brief review of the financial results reported earlier today.

Thank you, Vijay. I'd like to start by saying how pleased I am to join Vical at this exciting time in the Company's development. I look forward to meeting with members of the investment community in the coming months. This morning we reported a net loss of $4.9 million for the third quarter of 2004 compared with a net loss of $3.6 million for the third quarter last year. The increase in net loss was due primarily to revenue reductions of approximately $2 million related to the timing of contract manufacturing shipments offset by $0.7 million gain on the sale of Corautus shares.

For the first nine months of 2004 revenues were approximately $3 million higher than in the same period last year, a very strong performance primarily related to increased contract manufacturing shipments for the NIH and the milestone payment received under our agreement with Gencell. Our net loss for the first 9 months of 2004 was $19.3 million compared with a net loss of $17.5 million for the first 9 months of 2003. This increase reflected increased spending on research and development consistent with our increased revenues and a nonrecurring settlement expense of $1.5 million in the first quarter.

Our performance to date is consistent with our full year net loss forecast of $26 to $29 million. I should point out that we may be at the low end of the forecasted net loss range if we complete all the requirements needed to record a block of revenues under our manufacturing agreement with the NIH. We are confident that this will occur either in the fourth quarter of 2004 or the first quarter of 2005, but not yet certain enough about the timing to modify our forecast.

As of September 30th, our cash, cash equivalents and marketable securities were approximately $79 million. Our current cash reserves are sufficient to continue development for the next 2 years in our existing programs and explore opportunities for additional programs from our own research activities, potential in licensing or acquisition or potential collaboration with development partners.

That concludes our summary of the financial results. Vijay?

Thank you, Jill. This concludes our prepared statements. Operator, we're now ready to open the call to questions from our invited participants. But before you line up all the people for questions, I have one question that I want to address because a number of people have called in and asked this question. So I want to preempt that question.

The question is what is Vical's potential to contribute to solving the current influenza vaccine shortage and what about long-term opportunities? Let me tell you, the current shortage of influenza vaccine, which is a vaccine derived from eggs, is not a technology that we are working on and it's not a technology that I would take investors money and invest in because it's a really age old technology. It really demonstrates the reliance on old technologies that has created this major public health crisis. That's why new technology is gene-based technology such as (indiscernible) plasman DNA technology are critical to development of future vaccines.

The other thing that people need to understand that when this technology first came out, the original research work on this technology was done on influenza and we've really come full circle. It's no secret that we have a research program in influenza. There are several opportunities to apply this technology to influenza. David, do you want to comment on where, what to feel for, areas where we can make a real contribution?

Of course. Our goal, and actually the Holy Grail of next generation flu vaccines are basically threefold. First of all, to provide cross protection, both with respect to drift and shift in the flu strain (ph). Secondly is to improve the immunogenicity in the elderly. And finally is to migrate away from the annual and even seasonal immunization vaccines that are required by the current annual vaccinations.

And with the availability of a fair challenged (ph) model, testing of constructs -- vaccine constructs it is reasonably (indiscernible) compared to some of the other diseases like HIV. So that's the question that a number of people have asked. I hope that gives you your answer. And I'm open to any other questions that people may have.

+++ q-and-a.

(OPERATOR INSTRUCTIONS) Eric Schmidt, SG Cowen.

Vijay, if I interpret your comments correctly, it sounds like you need to execute on the SPA for Allovectin before you can really have a good chance of signing a partnership on your terms. Is that correct or am I reading too much (inaudible)?

I think you're reading a little too much. You know how business and commercial discussions go. A, as we have said before, yes, indeed we are in discussions with companies and we are also at the same time in panel discussions with the FDA. So the SPA is not in hand. So if the answer to your question is will the deal done before this SPA is finalized, the answer is absolutely. Anybody who is going to sign a deal with us will make sure the SPA is finalized because the FDA has not yet finalized. But I think we have a reasonable ability to communicate to our commercial partners what's the goal of our SPA, okay?

So you're out there today prior to having an SPA talking with others about the program?

Yes, we are.

And then David, a question on the IL-2 vaccine delivered via Electroporation. Do you think this technology would allow you to get at metastatic sites internal to the body or do you think that this is only going to be useful in treating those lesions that are on the surface?

Well, certainly we will treat the lesions that are accessible, but what the goal is obviously is to have a systemic effect. And I think that there is some data to suggest that that can actually happen. So the idea is to get the tumor to express IL-2; that IL-2 doesn't stay in just the injected tumor but moves systemically, particularly in the regional area in the draining lymph nodes. So it should have a systemic effect.

Great. Thanks a lot.

(OPERATOR INSTRUCTIONS) May-kin Ho, Goldman Sachs.

I want to continue the question on the flu vaccine. I thought that Merck had the rights to that, did this change?

Yes, it did. I could be misquoted here, but about a year and a half ago when we renegotiated the rights and (indiscernible) actually put it in the press release. We did get rights back from Merck for the flu vaccine along with some other intellectual property associated with it. So we have (indiscernible) to operate in areas even where Merck has some intellectual property now.

And how come Merck did not go ahead with it after probably 7 or 8 years of research?

Well, I think people change, lead researchers leave, the person who was really the force behind the entire influenza activity there was Margaret Lui and when Margaret Lui left that expertise and a whole bunch of here team actually went from -- followed Margaret Lui and so the influenza vaccine expertise left Merck and then they turned their eyes to HIV. As you know, recently some of the HPV expertise left. So, it depends -- vaccine development requires a lot of know how and expertise and it's a team approach and if the team leaves that focus vanishes from the company.

But even before Margaret left there was hardly anything coming out from Merck.

After Margaret left the flu program basically died at Merck.

No, what I'm trying to say is even when she was there they didn't do a lot with this technology trying to understand what data they have that affected the decision.

When Margaret actually used -- when the technology was used by Merck, other than talking of Margaret, early on and this business the technology was very embryonic in terms of development. It had not reached its performance level and I think there was a lot of disappointment when it didn't meet some of the endpoints that they had set for themselves. Merck then (indiscernible) and did a large, significant improvement in the technology both in the design of the plasman, the manufacturing process, the formulation and all those games which we also have somehow managed to get access to independently are now being used in validation of this technology.

Do you have to pay Merck any royalties if you have any products commercialized?

Which one? In influenza? The answer is no.

Thank you.

If there are no further questions at this time I will now turn the conference back over.

If there are no further questions at this point in time, I want to thank all of you for joining us and we look forward to seeing you between now and the next quarter either at another investor conference or physically in your offices. Thank you again and make sure you go and vote this morning.

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