Brickell Biotech Inc (BBI) 2007 Q2 法說會逐字稿

Good day 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 the conference up for questions and answers from invited participants after the presentation.

I will now turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, sir.

Hello, everyone. Welcome to our second-quarter 2007 financial results conference call. Participating on the call today are Mr. Vijay Samant, our President and Chief Executive Officer, and Ms. Jill Church, 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 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 second-quarter 2007 financial results.

These forward-looking statements represent the Company's judgment as of today. Company disclaims, however, any intent or obligation to update these forward-looking statements. Now, I would like to introduced Vical's President and Chief Executive Officer, Mr. Vijay Samant.

Technology, Alan, and welcome everyone. We have made great progress in our development programs over the past three months, and our call today will provide an update on this significant achievement. But before we start, I want Jill Church, our CFO, to review our financial results. Jill?

Thank you, Vijay. Earlier today, we reported a net loss of $8.2 million or $0.21 per share for the second quarter of 2007 compared with a net loss of $3.2 million or $0.11 per share for the second quarter of 2006. The increase in net loss reflects the higher spending levels associated with advancement of our independent product development program. We also have proactively reduced contract manufacturing activities to allow greater focus on our independent development program.

Spending has increased ahead of schedule in our pandemic influenza vaccine program as we completed preclinical testing and successfully filed an IND for our Phase 1 trial. Spending also increased in our CMV Phase 2 trial and our Allovectin-7 Phase 3 pivotal trial as we expanded recruitment efforts. Vijay will provide more detail on these developments later in the call.

On the revenue side, we completed the final contract manufacturing shipment to the NIH under a $12 million production order for HIV vaccines in support of a large Phase 2 trial, which is expected to begin this year.

As noted in our press release this morning, we have revised our forecast to a full-year net loss of 32 to $37 million and a net cash burn for the full year, excluding equity investments, of 27 to $32 million. We ended the second quarter with $82 million in cash.

I will now turn the call back to Vijay, who will provide an update on our development program.

Thank you, Jill. I will start this morning with a very important achievement that we disclosed in our earnings release, the allowance of our Phase 1 pandemic flu IND. We're particularly pleased of this achievement because, first, we received the allowance within the statutory 30-day period after the filing of the IND. We were able to successfully address all the standard issues including extensive preclinical safety and tox testing required for introduction of an oral adjuvant into human. Third, this trial is particularly important to Vical because it marks the first time in man for our adjutant Vaxfectin, which is a very important value driver for the Company.

In fact, we are quite proud of our regulatory record, which includes six IND filings in the last four years. All of these INDs and every previous Vical IND has been allowed. No allowed INDs have ever been placed on hold. This outstanding series of successes is a tribute to the expertise and dedication of the Vical regulatory team and our cross-functional product development teams.

With the allowance of our latest IND we now expect to begin our Phase 1 pandemic flu trial earlier than originally planned. This trial will be a double-blind placebo-controlled dose escalation study in approximately 60 healthy subjects. We will be testing our trivalent DNA vaccine which includes plasmids encoding H5, a consensus nuclear protein, and a consensus M2 formulated with Vaxfectin. We will also be testing a monovalent vaccine which includes a plasmid encoding only H5 formulated with Vaxfectin. So that is the important news on the pandemic flu trial.

Let me talk a little bit about Vaxfectin. The proprietary Vaxfectin adjuvant used in our pandemic flu vaccine continued to generate exciting data. There are now 11 scientific publications showing the benefits of Vaxfectin with a variety of infectious disease DNA vaccines in animal models ranging from mice to nonhuman primates. I don't have the time to go over the studies today; but if anybody is interested they can get ahold of Alan Engbring and we can provide you those studies.

We reported in our last call on a recently completed study showing a 60-fold higher antibody titer responses with Vaxfectin formulation than with unformulated vaccine using sanofi pasteur's seasonal influenza vaccine. We also saw a 10-fold reduction in vaccine dose.

These data point to potential use of Vaxfectin as either a dose-sparing or efficacy-enhancing adjutant with seasonal or pandemic influenza vaccine. We are now planning to test Vaxfectin in animal models with an H5N1 subunit protein vaccine being provided by the US government.

Perhaps the most compelling Vaxfectin data to date were presented during the second quarter at the American Society of Gene Therapy Annual Meeting, based on experiments conducted by Dr. Diane Griffin of Johns Hopkins. A Vaxfectin formulated DNA vaccine against measles was tested in juvenile rhesus monkeys, one to two years of age, and provided complete sterilizing immunity with no detectable circulating virus after the live challenge. Really one of the best datas we have seen with our construct and Vaxfectin.

A second study tested the same vaccine in infant monkeys six to 10 weeks of age and also produced productive levels of neutralizing antibodies. Follow-on challenge data should be available later this year or early next year. There were no vaccine-related adverse events in either study.

Now this study is particularly important because the currently available live attenuated measles vaccine cannot be given to infants where measles really strike, in sub-Saharan Africa, with vengeance, simply because the maternal antibodies make that live attenuated vaccine ineffective.

Moving on to CMV, you may recall that we implemented a series of protocol amendments to increase enrollment rates in our Phase 2 trial. Those amendments are now largely in place across our active clinical sites. Based on the success of these amendments, we were able to announce in July that we reached a milestone of enrolling our 20th stem cell transplant recipient into our Phase 2 trial. After a two-month follow-up visit for the last subject, the interim safety data for all subjects enrolled will be reviewed by an Independent Safety Data Monitoring Board. We expect to see the results of their analysis before our next conference call in early November. We will continue to monitor progress of the Phase 2 trial and look forward to completion of this study as soon as possible.

Earlier this year, we initiated AIMM Phase 3 pivotal trial for Allovectin-7 in chemo naive patients with metastatic melanoma, with funding through a combination of cash payments and equity investments from our partner AnGes in Japan. This is the same partner which has a license for the PAD trial, the PAD product, which is based on Hepatocyte Growth Factor, which I will cover later. We're making good progress in securing and opening clinical sites. We have now initiated 30 sites in the United States and received allowance from the Canadian health authority in late July to proceed to open six sites in Canada. We expect to begin opening sites in the selected European countries by year-end.

We are encouraged by the progress to date and expect the normal acceleration of enrollment as the remaining sites come online and as the (inaudible) gets further critical experience with this trial. Our goal again is to get this trial done as soon as possible.

Among our partnered programs, periopheral angiogenesis provides one of the nearest near-term and potentially the largest market opportunities for our technology. PAD affects at least 10 million people in the US alone, with a potential US market of at least $1 billion or higher. Europe and the rest of the world markets would more than double those numbers.

We're pleased that AnGes, our partner in Japan, announced during the second quarter that they were stopping their Phase 3 PAD trial early to advance directly to filing for a marketing approval in Japan. AnGes reported positive results following an interim analysis data from only (inaudible) subjects to complete the Phase 3 trial of its angiogenesis product candidate. The primary efficacy endpoint of the trial was achieved with statistical significance, and there were no major safety concerns related to treatment.

This product candidate has potential to be the first using Vical's technology to receive marketing approval in Japan and the first in the world to receive marketing approval for use in humans. For Vical, the approval leads to a milestone payment. It's a validation of our technology and also mid single digit royalties.

In conclusion, we look forward to continued progress through the remainder of the year. This concludes my formal comments. Operator, we are now ready to open the call two questions from our invited participants. Thank you.

(OPERATOR INSTRUCTIONS) Mark Monane of Needham & Company.

Good morning and thanks for reviewing the quarter with us. I also have Alan Carr with me. Question on the CMV program. We haven't seen the data yet, and I assume you have not either. What qualities of the data should we pay attention to when it should be available? It looks like it may be available in the fourth quarter of this year. Is that right?

Well, you know, we have not actually projected when the data is being available.

To answer your first question, though, I think the most important thing in these patients -- safety is absolutely important. Because these are really sick patients, so safety of vaccine or any treatment is very important in this patient population.

Really the key endpoint is really the incidence of CMV. CMV normally shows up between day 80 and 100. If you can delay the reactivation of CMV in the vaccinated arm, that is a clear success.

That's helpful. That's helpful. With the DNA vaccine program, there is a question of how quickly in the past DNA vaccines actually work to get to immunity. Can you describe to us what you see now with your experience across the vaccines, about when do you start to see a patient response, and when that response becomes most robust?

I think it is a great question. DNA vaccines, unlike protein vaccines, behave differently, where in protein vaccines our experience with anthrax, -- particularly as we, when we dealt with nonhuman primates -- we found that when you give a protein vaccine to nonhuman primates you get antibody titers very rapidly.

With DNA vaccines, the antibody titers don't rise that rapidly, but you create good memory. Because in nonhuman primate experiments we were able to protect nonhuman primates which were given DNA vaccines with very low-level antibody compared to the protein vaccine. But postvaccine, post-challenge, the antibody levels of the DNA arm were much higher than the protein arm.

So there is a different kinetic pathway for DNA vaccines. But it also depends on the immunogen that you're encoding. So it is not just the DNA vaccine, the platform alone. How immunogenic is the gene sequence? And what indication you are going into? So there are a combination of three things at play.

But obviously, DNA vaccines have a different modality. It has been seen in the vaccine (inaudible) in the past. If you look at the Haemophilus b influenza vaccine that Merck licensed several years ago, which was the second vaccine on the market, the titers that originally were evaluated in the first clinical trial were much lower than the licensed vaccine. However, the vaccine was much better -- today, if you go and ask all the pediatricians, it is a much better vaccine and has a much better protection rate than the other vaccines.

So you just can't go on either T-cell markers or antibody levels. The area that we really don't understand is the creation of memory, and that is where DNA plays a very important role. That is one of the key reasons why DNA vaccines are being used in all the HIV vaccine trials. 60 to 70% of all the AIDS vaccine trials are using DNA as their core component.

(multiple speakers) helpful. I think Alan has a question.

Yes, I have a question about your partnered PAD programs. Do you have any updates from AnGes or Sanofi regarding their plans for PAD in the US?

We expect the Sanofi trial to start in the near future. It will be starting both in US and Europe. They have actually announced that their plans for filing BLA are 2009, 2010. I think they are on their plan okay, so we should expect to hear from them in the next couple of months that the trial is starting simultaneously. I think the trial design is already being defined. The endpoint there is amputation in -- Alan, what is it? 300 and --?

Almost 500 patients.

500 patients in 30 --.

Half of those placebo.

Half placebo. It is a double-blinded efficacy-controlled study and it is in about 30 countries. Simultaneous filing in Europe and United States is what we believe.

The Japanese company really wants to make sure with their limited resources to do the filing in Japan first, get that out of the way before they rush and do a trial. It is a matter of optimizing and managing your resources. But that will also occur.

Timing for that is yet to be defined. But just to remind you, they already did a Phase 2 study in the United States. So for them to go to a Phase 3 study, they don't have to start from a Phase 1.

Do you know what sort of trial they would run next in the US?

I would believe that, based on their experience in Japan, they will tune their US trial to mirror what they did in Japan, and would be in the kind of size or even smaller size than what Sanofi is running. Because remember, Sanofi is running a US and a European trial. So my guess would be about 200 to 300 patients.

Okay, thanks very much.

Navdeep Jaikaria of Rodman & Renshaw.

Thank you very much retaking my call. This is Sean Wu standing in for Navdeep.

I didn't know Navdeep had grown up in China, but that is okay.

Yes, so. I have, for your CMV trial, right, is it a pure (inaudible) trial or they will do some futility analysis to see whether the trial should go forward?

The answer is, any good clinical practice you always do a futility analysis, okay? No trial goes on without futility analysis. Our prior Allovectin-7 -- so the answer to the question is yes. We are going to be looking at that kind of concepts to make sure that we know we are on the right track.

As to the timing of it or when we are going to do it, I'm not going to be able to tell you at this stage.

No, no, I'm just talking about CMV trial.

That's correct.

So this will not be a part of the (inaudible) patient analysis? This is the one you will announce results by early November, that is a pure safety study? Safety analysis?

Yes, the 20-patient is just a safety analysis, (inaudible) utility analysis of those 20 patients. Okay?

Excellent, thank you for that. So for the Japan one, any kind of more specific timeline to approval in Japan? Which kind of market opportunity is there?

All I am saying is they have put all their resources behind it and their goal, as they said, is to file as soon as possible. Hopefully before year-end. As soon as we hear something, we will issue a press release or forward their press release to our investor community.

Can you just remind me of one thing? You said your Phase 1 trial of the pandemic flu vaccine will start earlier than expected. What was your original timeline for that?

Now that we have achieved a new timeline, the answer is we were expecting towards the later of -- this later part of this year, okay?

So is it safe to assume you can start a trial in late third quarter?

I think we should start the trial sooner, obviously, because we got the IND approved. The only thing that stands between us and getting the trial is making sure that the local -- the normal -- some companies submit their RRBs, do their RRBs before the IND is approved.

We follow a more cautious pathway. We want to make sure the IND is approved. Now we are waiting for the RRB approvals. As soon as the approvals come through, the trial will start.

Thank you very much.

Eric Schmidt, Cowen and Company.

Yes, thanks for taking my call. Vijay, could you provide us an upstate with the NIH HIV vaccine trials, both the 500-patient study from which we are expecting data as well as the future study there?

Yes, that is an excellent question. You know, we have made all the constructs for them. They were shipped, I think, towards the end of June. Is that correct, Alan? End of June.

We understand they are formulated, and that we expect the trial to start in the very near future. This is the 8500 PAVE study which is going to be conducted in United States, Latin America, the Caribbean, and Africa. I don't know where the first patient is going to be injected, but that should occur very shortly.

It is a landmark study because it's one of the first largest studies being conducted. It is a proof of concept study, Phase 2b study. It is being conducted in a double-blinded fashion in discordant couples where one of the couples is HIV-positive, the other one is HIV negative.

We are pretty excited because we are part of this program. The fact that such a large trial is being conducted by a very important national institution, and we were able to successfully make clinical grade material for them for a company of our size is a pride for Vical employees, okay? So we hope to see that trial succeed, because a vaccine is badly needed.

On the other front, that vaccine, the 500-patient study data, we are being told, but the abstracts are up there; we have not received the data yet. But at the Seattle conference, which is normally the retroviral conference, this year I understand is known as the AIDS Vaccine Conference. This is the one I think that David Ho chairs from Rockefeller University. The data will be presented at that conference. That is coming up towards the third week of August, I think, Eric, around 23rd, 24th, in that time frame.

Thanks. Then on the Allovectin pivotal trial, do you have a best estimate of when you might complete enrollment? Is that going to be a 2008 target, or a 2009 target? Just any kind of ballpark sense there, Vijay?

I think we have always said that it will take us at least two years to recruit. So I would say about 2009 would be our earliest goal to get complete. But our goal is to get it done as quickly as possible.

We have 30 sites, as I said, open. We want to go to 60 sites. We want to get critical mass at those sites. We also are fortunate that we understand -- but though we have not confirmed it -- that one of the big competitors for us, the Pfizer trial, is winding down. I don't know what that means, but we need to see impact that trial has it.

But we have gone out and reached potential investigators, key opinion leaders. We have Internet based communications including a dedicated website. We have search engine rankings. We are getting patients from all kinds. We are trying to go to Europe. We got approval in Canada. We will go and consider a couple of sites in Latin America.

So all -- everything is behind this clinical trial, because we believe that Allovectin-7 is such a well-tolerated treatment compared to the modalities that are out there, that if we meet the endpoint this could be the best thing that can happen for melanoma patients.

Last question is on your pandemic flu vaccine. Are you hopeful that you can get some funding from the NIH to conduct this Phase 1 study? I know you're going to go ahead either way. But I guess more generally, what is the funding outlook?

The funding outlook -- the funding outlook is good in the sense that -- could we have conducted this Phase 1 study through the NIs? The answer is absolutely yes. But when you do that, you're at their own mercy; you're at their timeline; you have to transfer the IND to the NIH; it is conducted by them; and it goes slow. You know?

We want -- this is the first time you are putting Vaxfectin in humans. We want to get Phase 1 data. And if they can provide stellar data, we should be able to get funding to do a Phase 2 study, a larger safety based database study either from the NIH or other foreign governments (inaudible).

Great, thanks a lot.

(OPERATOR INSTRUCTIONS) Brian McCarthy of Merriman Curhan Ford.

Good morning. I was wondering what progress Merial has made in the past quarter with the canine melanoma vaccine.

Well, their product started shipping towards the third week of June. So you know, it is barely about a month plus when the product has shipped. So the answer is, we are still on the learning curve. We have not received any updates from them. I think hopefully, if we get some updates by the next conference call we may be able to make a comment. But I can't promise in terms of giving you any update till I hear something from Merial. But started shipping third week of June.

Okay, thank you. Also, since you recently completed your IL-2 trial I was wondering if you had any immediate plans for electroporation?

Well, we have, as I have told the team, we have a number of targets which we have access to on the electroporation technology. The challenge with the electroporation technology has been the tolerability in healthy volunteers. That is something that is hard to overcome.

So it has a niche. We also showed some recent data where we compared in rabbits Vaxfectin along with electroporation. We showed the data was equivalent.

So right now, yes, there is some opportunity there, but we don't have a clear pathway as to where we are going to apply it next, okay?

Okay, thank you very much.

Thank you. With no further questions, I would like to turn the conference back over to Mr. Vijay for any additional or closing remarks.

Thank you, ladies and gentlemen. We hope to see you in the near future. Take care.

Thank you for your participation. That does conclude today's conference. You may disconnect at this time.