Brickell Biotech Inc (BBI) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Vical third quarter financial results conference call. Just a reminder, everyone, today's call is being recorded.

At this time for opening remarks and introductions I'll turn the call over to Mr. Alan Engbring. Mr. Engbring, please go ahead.

Thank you. Hello, everyone. Welcome to our quarterly financial results conference call. Participates on the call today are Mr. Vijay Samant and Ms. Jill Church, our Chief Financial Officer. Participating on the call today are Mr. Vijay Samant, our President and Chief Executive Officer and Ms. Jill Church, our Chief Financial Officer.

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 2007 financial 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 welcome everyone. I would like to start today by thanking all of you who reached out to us during the massive wild fires that hit San Diego last week. We did close our business temporarily at the request of local authorities to keep the roads clear for emergency vehicles and allow employees to focus on their family needs. Many of our employees had to evacuate their homes.

However, I am delighted to report that no Vical employee's suffered serious injuries or lost their homes. All company assets are safe and secure and critical functions were maintained throughout the crisis. We resume full operations Thursday morning and are now back in business as usual. Since our last call, we had a very productive three month period. And before I go into the development programs, I would like our CFO Jill Church to review our third quarter financial results. Jill?

Thank you Vijay. Earlier today, we reported financial results for the third quarter of 2007, which reflected significant progress in our pandemic influenza vaccine program and our CMV vaccine and Allovectin 7 program. Spending for pandemic influenza increased in the third quarter, as we've prepare to begin our Phase 1 trial, which is now well under way. Spending also increased in our CMV vaccine Phase 2 trial, as we continued stepping up our patient recruitment efforts and in our Allovectin 7 Phase 3 pivotal trial, which now has opened 36 sites out of the planned total of 60.

These developments are all in line with our expectations and we remain on track with our forecast for a full year cash burn of $27 to $32 million. We ended the third quarter with $77 million in cash. We will provide a 2008 forecast in our February conference call. But we do not expect significant changes from current levels as the current program related revenue and spending patterns are likely to continue through much of the next year. I will now turn the call back to Vijay who will provide an update on our development program.

Thank you, Jill. I'll start this morning with angiogenesis programs. These are our two partnered programs and they are probably the nearest in terms of commercialization opportunity and really are not really understood in terms of the valuation that can bring to Vical's base core technology. We have two partners in this field working on angiogenesis, one is AnGes and the second one is Sanofi Aventis. The initial indication from both these programs is PAD but later on the same technology can be applied to cardiovascular applications. During the second quarter, our Japanese partner AnGes stopped their Phase 3 PAD trial early, based on interim results to advance directly to filing for marketing approval in Japan. The primary end points were improvement of rest pain or ischemic ulcer size at 12 weeks post dosing, the treatment group showed a 70.4% improvement versus 30.8% for placebo with a P value of 0.01. We expect for AnGes to file for Japanese marketing approval in the near future. If approved the product would reach market in 2008. Sanofi Aventis, our other big partner in this same field, started their 500 patient, Phase 3 clinical trial in the third quarter as expected. Results from an earlier Phase 2 trial demonstrated a statistically significant reduction in rate of both major amputations and all amputations in patients receiving treatment compared with those receiving placebo. Amputation is the primary end point in Phase 3 trial, really a clean end point. Resuming successful completion of the trial, Sanofi Aventis expects to file for marketing approval in 2010. This program was presented in their September analyst day meeting in detail.

PAD, which affects at least 10 million people in the US alone with the potential of market in excess of a $1 billion, Europe and the rest of the world markets can even double this market size, making this one of the most potentially largest market opportunities really in the near term for our technology. Both the AnGes and Sanofi Aventis programs are initially focusing on advanced PAD but we expect use in earlier stage diseases as these treatments gain acceptance in the world market. Because both programs are built on the same Vical technology platform but use a different angiogenic growth factor gene in case of the Japanese AnGes -- they use a parasite growth factor, the French are using FGF 1, they have the potential to combine both these therapies which could lead to even higher sales and royalties for us potentially. As both AnGes and Sanofi Aventis programs advance toward the next few years, we stand to collect milestone payments. Once approved these products would generate substantial royalties to Vical. The size and immediacy of these programs should put them in high -- in the valuation model for anybody analyzing Vical's true potential.

Moving on to Allovectin 7, our lead oncology program, we are now actively recruiting at 36 sites across the United States. And expanding our AIM Phase 3 pivotal trial geographically to strategically located sites in Canada, Europe, for a planned total of 60. We are also evaluating selected sites in South America which could provide access to melanoma patient populations in that part of the world. Patient recruitment [AIM] trial remains our top priority. We are targeting completion of enrollment by mid-2009. Again, let me repeat. We are targeting completion enrollment by mid-2009. The (inaudible) is designed to support approval of Allovectin 7 as a first line therapy for advanced metastatic melanoma which would fill a large un-met medical need. Allovectin 7 is delivered in an outpatient basis. With no pretreatment or post treatment medication, the two currently approved first line treatments for metastatic melanoma have reported drug related serious adverse events as high as 60%. In a high dose Phase 2 trial, Allovectin 7 had no grade three or four drug related adverse events and none of the patients seeing the treatment dropped out of the trial for tolerability reasons. If the Phase 2 safety profile is maintained in the Phase 3 trial, and if they meet the efficacy points agreed to in the SPA, we believe Allovectin 7 could have the ability to garner a substantial portion of the metastatic melanoma market.

Next, I will provide a brief update on our CMV vaccine development program. We announced at July that we had reached a milestone for enrolling our 20th stem cell transplant patient into our Phase 2 trial. After that subject completed a two month follow-up (inaudible) we announced in October that an independent data safety monitoring board found no safety issues for those first 20 patients and recommended continuation of the trial. While DSMB looked only at safety in the interim evaluation the primary efficacy end point in the double blind placebo control Phase 2 trial is the occurrence rate of clinically significant CMV levels. In a (inaudible) stem cell transplant patients receiving vaccines compared with patients receiving placebo. Most (inaudible) recipients are expected to face a natural viral challenge or reactivation as pre-existing CMV infection reactivates during the period of immunosuppression. Other important end points include immune responses against specific CMV proteins targeted by the vaccine. Based on the improved recruitment that we have seen in the recent months, we now look forward to reviewing interim efficacy data from this study by the second half of 2008.

Next I'll provide an update on our pandemic influenza program. In our last conference call in early August we announced IND allowance of our Phase 1trial. We announced the enrollment of our first subject in the trial by the end of August. The double blind placebo control trial is enrolling up to 60 healthy volunteers, age 18 to 45 at two US clinical sites. I'm pleased to report that we have now completed enrollment of the first two dose cohorts for a total of 18 subjects. Everything in this trial has progressed well so far. We expect to advance to the highest dose cohort in the near future and continue to monitor safety, tolerability, immune responses up to six months after vaccination. We expect to complete the trial and have results available in the first half of 2008. Pandemic influenza remains at the top of the emerging infectious disease priority list because of its widely accepted (inaudible) and its potential human economic toll. HHS is estimated the US impact of a 1980 -- HHS is Human Health Services, the 1980 like pandemic can cause 1.9 million deaths and $200 billion in economic loss globally. This could translate also in terms of casualties about 10 million of deaths, and a nearly $1 trillion loss in the rest of the world. All the estimates of the impact very widely even the most conservatives support continued development of appropriate counter measures and vaccines remain among the most favored tools and top priority of development. We believe our vaccine offers many unique advantages that could be critical in avoiding a pandemic driven disaster.

I will take a minute now and talk about Vaxfectin. Which has really progressed well in the last six months. Our pandemic influenza vaccine -- DNA vaccine, is formulated with our Vaxfectin Adjuvant, which has demonstrated effectiveness with growing number of DNA vaccines in multiple animal models. Vaxfectin is also demonstrated a 10-full dose-sparing and a 34 immune enhancing ability in mice with the Sanofi Pasteur's influenza vaccine. This is not negating vaccine this is a regular subunit vaccine that's sold commercially every year. We also recently demonstrated Vaxfectin's dose-sparing and immune enhancing ability in mice with the pandemic influenza vaccine currently stock piled by the US government. As you know, that pandemic vaccine requires 6 fifteen microgram shots and is purely immunogenic. After two doses of Vaxfectin formulate vaccine produced nine full higher antibody responses at the same dose level as the unformulated vaccine and at a five (inaudible) better antibody responses at 0.3 the dose level of the unformulated vaccine. Again, this was done all in mice. We presented this data in early October at the world vaccine Congress in France. At the same conference we reported that a measles DNA vaccine formulated with Vaxfectin resulted in sustained protective levels of neutralizing antibodies in infant non-human primates. These are baby monkeys, only six to ten weeks old. Complete protection was confirmed following a challenge one year after the [interdermal] injection with no clinical signs of the disease and no culturable virus after challenge, almost a sterilizing immunity, which is really the Holly Grail of [vaccinology]. In May, we announced similar results, in June on non-human primates, one to two years old, both measles studies were conducted in collaboration with Dr. Diane Griffin at John Hopkins School of Public Health and were funded to the grants from Bill and Melinda Gates Foundation. The (inaudible) from Gates or other sources will be available to continue future development of this very important vaccine. We are encouraged by recent influenza and measles data which are the latest examples of Vaxfectin's Adjuvant capabilities. Our Phase 1 pandemic influenza vaccine trial marks the first time in humans for Vaxfectin and we continue to work with a number of outside collaborators to evaluate the use of Vaxfectin in a broad variety of vaccine applications. In conclusion, we look forward to continued progress with enrollments in our independent clinical stage programs and continuing news from our partnered programs through the remainder of the year and early next year. That concludes my prepared comments, operator, we are now ready to open the call to questions from our invited participants.

Thank you, Mr. Semant. The question-and-answer session will begin at this time. (OPERATOR INSTRUCTIONS) Please stand by for your first question. Our first question comes from Alan Carr with Needham.

Hi, good morning everyone.

Good morning.

Question on the partnered PAD program. It sounds like AnGes is making some progress there and they'll be filing I think by year end -- but have you gotten any update from them on what their plans are in the US for initial trials?

I think a great question. I think just to remind our audience that they had already conducted a Phase 2 trial in the United States which had similar outcome of their Phase 2 trial in Japan. When they start their Phase 3 trial in US, they are not starting from scratch but they already have an existing IND. I think right now, the best they have communicated with us is their priority with their resources is to get the BLA the -- the BLA file in Japan and get that out of the way before they embark on the US piece. So, the sequence of events from what we understand today is BLA filing in US is priority number one -- not US, in Japan, priority number one. Once that's done, then move on to the US trial. So, the timing would be some time next year. They have not formally announced that yet.

Okay. How about the partnered HIV programs? Any updates on time lines there?

As you know, there was a recent stoppage of the Merck HIV trial, by the way, which was not based on DNA vaccines it was an adenovector vaccine trial. The trial was simply stopped from what I understand, the complete data has not been fully disclosed. But it was a placebo controlled study where people received two or three injections of an adenovector delivered HIV genes and they found in the first thousand patients or so that the -- there was no statistical difference between the placebo arm and the adenovector delivered gene sequence arm. However there were more advance of breakthrough in the adenovector arm. More data is going to be apparently released in the first week of November, so our trial which was going to start with VRC in the fourth quarter of this year, has been put temporarily on hold until we fully evaluate what the outcome of this data this. Now, that data is completely different, thats a complete adeno trial, this is a DNA trial with an adeno boost. But we has to be prudent or the scientific committee wants to be prudent, to make sure they fully analyze the Merck data, before they embark on the next trial. My expectation is the trial will start early next year.

Okay. Thanks very much.

We'll go next to Eric Schmidt with Cowen and Company.

Thanks for taking my question. Vijay, I didn't quite understand where you were with the pandemic flu study. Did you say that the first two cohorts have been enrolled and that's a total of 18 subjects?

Correct.

Okay. And what do we know about the responses, if anything?

The response, remember, they're two injections and you really measure response at least four to six weeks after the second injection. So, we have no responses. And we are going to batch all the people together, so, there is no (inaudible). But from a safety perspective, we've not seen anything obviously. The first cohort (inaudible) through is safety, there was no safety issues. Remember, this is the first time we are taking a new (inaudible) into humans though, okay. And so we have not -- so far, so good. We are pleased with how things have gone so far.

With Vaxfectin, as you mentioned looking good both so far in this study and then in the other study in combination with the commercial flu pandemic, should we be looking for some sort of a collaboration with a commercial flu provider or what's the next steps for this regimen?

If I tell you I will shoot you, that's the kind of answer I will give you. The answer is we working with a number of people on the variety of uses of Vaxfectin. And as you know, they're all dependent on data. And if the data looks good, obviously there will be commercial opportunities. So, you're on the right track. But, I'm not ready at this point to commit to anything.

Okay, and last question is on CMV vaccine. You of course put out the press release in October, saying that the interim safety analysis showed no issues. I mean, is that really no, no safety issues? What does the DSMB tell you about the safety profile?

DSMB said absolutely no -- there were no safety issues in terms of the vaccine arm versus placebo arm. This is a touchy population that you go into, okay. We're absolutely scared that sometimes it's hard to distinguish between the safety issue which are drug related versus intrinsic safety issues in dealing with these patients who have so many complications. And they looked at it very carefully and found absolutely no reason that vaccination is any way any different from than the placebo arm.

Great. Thanks for the clarification.

(OPERATOR INSTRUCTIONS) We'll go next to with Navdeep Jaikaria with Rodman & Renshaw.

Navdeep -- and good morning.

Good morning, Navdeep, how are you?

Good, thanks. You know, regarding the Allovectin 7, I just wanted to confirm, you're targeting enrollment completion by mid- '09.

Correct. Hopefully sooner but that's the target.

Can you give any color as to the number of patients that have been enrolled thus far.

We have stayed away from (inaudible) patient by patient. But we are making good progress. We have 30 sites at the end of last quarter. Then we have moved to 36 sites. Our game plan is to move to 60 sites. At as some of these sites -- as they get experienced, three or four month, the patient recruitment increases, you know the patient recruitment per site goes anywhere from 0.2 patients to 0.5 patients per site per month, depending on the kind of site it is and the number of patients that it gets. It's a large variability. Also there is competition with various other programs going on. Fortunately, one of the big trials is just finished recruiting. So, that bodes well for us. So you know, our game point -- at some point in time is we meet some critical milestones in the Allovectin 7 recruitment. But we're not going to give patient by patient update.

Great, fair enough. And a similar question on CMV trial, I mean is the enrollment going as per expectation or anything?

The answer to your question is we are pleased with all the (inaudible) that the enrollment has picked up. That's why we said today that we'll have an interim efficacy analysis in the second half of '08 based on our projections, okay, and sufficient experience of patients having had past post (inaudible) vaccination of three to six month period, okay.

And following up on the Vaxfectin front, what other indications you can envision and any plans of making it as proved adjuvant for multiple settings?

It's a very interesting question that you ask. Okay. And I remind on my road shows and when I talk to people, [alum] is the only approved adjuvant approved in the United States, its been in place in the last 60 years. There is an adjuvant approved by GSK in Europe for the hepatitis B vaccine and now for hepatitis -- human papilloma vaccine. Those have not yet been approved in United States. So, the opportunity for an adjuvant is obviously there and the key in having a good adjuvant is the adjuvant has to improve the immunogenity of the constant that you are using without causing any other kinds of complications. So, it has to have a fair balance of incrruing immunogenity without creating any autoimmune or pushing buttons on the (inaudible) like receptors or anything like that. And you know, to date, based on all the animal data that we are seeing, this is the kind of adjuvant which is improvement or and [alum] but it's not an adjuvant that goes to the far where it can create complications. So, I think we are working with a number of applications in the field of oncology, there are applications for this adjuvant in conventional vaccines. There are applications for this vaccine also in SR&A. So, there are a variety of theaters where we are all collaborating with a number of people.

Great and also, [alum] is just an antibody response from (inaudible) your vaccine seems to do both.

That's right. We expect to be both T cell and B cell responses. And that why, remember, the key components -- the key drivers of our flu vaccine on nuclear protein and M2, of which nuclear protein is primarily a T cell mediated response. And Vaxfectin both in measles and (inaudible) other applications are shown to both have that ability, okay, to involve both arms of the immune system.

With no other questions, I'll turn the call back to Mr. Samant.

Well, thank you for all of you dialing in this week and again thanks for all the good wishes that everybody expressed to us, practically everybody in the call today regarding the fate of our employees during the San Diego wildfires that we experienced last week. Thank you again for your concern about Vical's health. We'll see you soon, bye.

Ladies and gentleman, this concludes our conference for today. You may now disconnect your lines.