Brickell Biotech Inc (BBI) 2007 Q4 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 the 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 fourth-quarter and full-year 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 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 specific risks and uncertainties noted in Vical's news release on 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. 2007 was a year of successful execution for Vical, representing solid progress across all of our programs, both independent and partnered. We started the year with some aggressive goals and have ended the year with a long list of accomplishments, and I want to take some time to go through those in the beginning of the call, and I'll elaborate on each of those programs later on in the call, after Jill finishes the financial review.

In our Allovectin-7 program, we started our pivotal Phase 3 trial and have opened 40 centers across the United States. In our Phase 2 CMV vaccine trial, we successfully overcame the initial slow enrollment issue (technical difficulty) -- the plane pass by overhead here -- we successfully overcame the initial slow enrollment issue by amending the protocol. Enrollment rates have picked up and we are now past the halfway point in this trial. This is an important milestone for us.

In our pandemic influenza vaccine program, we completed our preclinical testing, successfully filed an IND and started our 100-subject Phase 1 trial with both needle- and syringe-free -- needle-free device. And we are now vaccinating subjects at the final 1 milligram dose level.

Our Vaxfectin adjuvant demonstrated both immunogenicity boosting and dose-pairing potential with DNA vaccines and conventional vaccines in animal studies, and so far has tested well up to the 1 milligram dose in initial human application in our influenza trial.

We also received a $6 million grant, which is not a product-specific grant, for scale-up of our rapid response DNA vaccine manufacturing platform. This grant will allow us to prove that we can make large quantities of vaccine in a very short period of time -- I'm talking several hundred thousand doses in a day.

Highlights in 2007 from our partners include, first, the conditional approval of Merial's Canine Melanoma Vaccine. This is the first therapeutic vaccine approved in humans or animals anywhere in the world, so it's a big, big accomplishment, both for a platform on the field of vaccines in general. This vaccine is being well-received in the market and is slowly advancing to its full approval, which we expect some time in the second or third quarter of this year.

AnGes, our partner in Japan, which is actually funding our Allovectin-7 trial and also our licensee in angiogenesis, has reached the efficacy endpoint after enrolling only one-third of the patients for its pivotal Phase 3 angiogenesis trial. Remember, it was a 120-patient study. They stopped the study at 40 patients because the data looked good, and they are going to file on the basis of 40 patients. And we expect that filing to occur sometime in the second quarter of this year.

Our other angiogenesis partner, Sanofi Aventis, initiated its pivotal Phase 3 trial in about 500 patients, which is designed to support approval in major global markets. I'll provide updates on each of these programs as we go through our conference call, but before doing that, I want to pass on to Jill Church, are CFO, to review our 2007 financial highlights. Jill?

Thank you, Vijay. Earlier today, we reported 2007 results, which reflected the significant progress in all of our clinical stage development programs, including our Phase 3 trial of Allovectin-7 in patients with advanced metastatic melanoma, our Phase 2 trial of our CMV vaccine in stem cell transplant recipients, and our Phase 1 trial of our pandemic influenza vaccine in healthy volunteers.

Reported results for the year were consistent with our expectations, with both the net loss and net cash burned falling within their project ranges. We ended the year with $71 million in cash, which is sufficient for our anticipated needs through at least 2009.

For 2008, we are projecting a net loss in the same range as for 2007, between $32 million and $37 million, and an effective cash burn between $27 million and $32 million, including the cash payments and equity investments anticipated from AnGes in support of our Phase 3 clinical trial.

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

Thank you, Jill. I'll start with Allovectin-7, our lead oncology program, which is in Phase 3 pivotal trials for metastatic melanoma. As noted earlier today by Jill, we received a $2.1 million payment in late December from our funding partner, AnGes MG, reflecting progress in the trial. We are continuing recruitment of patients at sites across the United States and we're actively expanding to sites in Canada and Europe that should further accelerate our progress. We anticipate completion of enrollment by mid 2009.

A brief reminder about the design of this trial. We call it the AIMM trial, which is designed to support approval of Allovectin-7 as a first-line therapy for advanced metastatic melanoma. The primary efficacy endpoint in the AIMM trial, which we negotiated with the FDA through the SPA process, is objective response rate at 24 weeks or more after randomization. So it is clear that response rate is the endpoint;, survival is not the endpoint. The idea is accepted response rate as a surrogate marker for survival. I think it's an important acceptance.

This endpoint should highlight the durable nature of responses to immunotherapy compared to the typically more rapid but more transitory responses in chemotherapy. Allovectin-7 is patient-friendly and is delivered in an outpatient basis with no pre-treatment or post-treatment medication. In our high-dose Phase 2 trial, Allovectin-7 had no great (inaudible) for drug-related adverse events and none of the patients receiving the treatment dropped out of the trial for tolerability reasons.

The two currently approved first-line treatments for metastatic melanoma have reported drug-related serious adverse events as high as 50%. If we are successful in our clinical efforts, we believe Allovectin-7 could become a well-accepted treatment alternative for the metastatic melanoma market.

Angiogenesis, which is really a big value driver for the Company and we have two partner programs. I'll focus today on both of those programs. And they really offer the nearest-term commercialization opportunities for a human application of our technology.

Our two partners in the field the angiogenesis are AnGes MG and Sanofi Aventis. One is a small Japanese biotech company in Japan. Naturally small; it has a market cap close to $1 billion. And Sanofi Aventis is a big pharma. And the initial application for both of them is in the peripheral arterial disease or PAD.

Last summer, as I mentioned earlier, AnGes stopped their Phase 3 PAD trial after meeting the primary endpoints in an interim analysis. Those endpoints, improvements in pain addressed and reduction in ischemic ulcers (inaudible) 12 weeks after dosing demonstrated statistically significant improvement in the treatment group compared with the placebo group. AnGes is currently preparing a filing for marketing approval in Japan this year.

Our second angiogenesis partner, Sanofi Aventis, is conducting a 500-patient multinational Phase 3 clinical trial. I think it's conducted in about close to 35 or 40 countries, if I'm not mistaken. The primary efficacy endpoint of this trial is reduction of the need for amputations in patients receiving treatment compared to those receiving placebo. This endpoint was a direct result of observed reduction in amputation rates in a previously completed Phase 2 trial which met a statistical endpoint.

Assuming successful completion of the trial, Sanofi Aventis expects to file for marketing approval in 2010.

The angiogenesis market is potentially one of the largest markets for our technology, and certainly offers the nearest-term opportunity for human application. From their initial focus on PAD, both AnGes and Sanofi Aventis programs would expand to earlier-stage diseases as these treatments gain market acceptance. They may also prove complementary -- again this has to be tested out -- if used in combination, since they rely on completely different growth factors. Remember, AnGes is using hepatocyte growth factor and Sanofi Aventis is using FGF-1, so their mechanisms for angiogenesis are slightly different. However, both are delivered by the same Vical plasma DNA technology.

Both programs should generate milestone payments as they continue to advance through development, and if approved, could generate substantial royalties to Vical. These are among our most exciting near-term value drivers and we will continue to monitor their progress closely and keep you informed.

CMV. Our CMV vaccine development program, which is in Phase 2 study -- as you know it's being tested in hematopoietic cell transplant patients or bone marrow transplant patients. As you may recall, in October, an independent data safety monitoring board recommended continuation of our Phase II trial based on interim safety data for the first 20 stem cell transplant recipients.

Now it's very important, these are really sick patients, so safety is a very important determination of this trial. So this is not a casual safety look. But going back again to the CMV program, the rate of enrollment of this trial has increased nicely since we opened the new ARM aligned vaccination in recipients only. In fact, the recipient only ARM has dominated our new enrollment, and we are now at passed the 50% enrollment stage. That is -- our goal is to have 80 recipients in this trial.

As a result, we have decided to phase out the donor recipient ARM because it's creating confusion in the clinic and we are not getting too many patients in that ARM, and concentrate all our enrollment efforts on the recipient only ARM. With enrollment now past the halfway point towards a goal of 80 recipients, we are now on schedule to complete an interim data analysis in the second half of 2008.

So what is this interim analysis going to show us? It's going to compare a vaccine versus placebo, groups using multiple efficacy markers, and I'm going to raise three of them for you today. First is the frequency of viral reactivation. Second is the total antiviral therapy used between both groups. And three, the most important one is the viral load and, of course, when you compare safety between both groups. And the data from this interim efficacy analysis should be available in the fourth quarter of 2008.

Another recent development in our CMV program was our license in January of exclusive rights to downstream of CMV from the Wistar Institute. The downstream is one of the few live attenuated CMV strains which has been tested in humans. It was developed by Dr. Stanley Plotkin who was the former head of research at Sanofi Aventis and a renowned vaccinologist responsible for the development of Rubella vaccine. It has demonstrated both safety and ability to elicit targeted immune responses against CMV in a number of human applications.

Through a collaboration with University of California San Francisco, we recently demonstrated that DNA vaccination provided a memory immune response that was boosted by a subsequent [down] vaccination. Subjects primed with the DNA vaccine mounted notably earlier immune response after the down boost than subjects who received down strain vaccine alone.

These data were presented by Dr. Mark Jacobson UCSF last December at the Vaccine Congress in Amsterdam. A separate Phase II/III study sponsored by the NIH is currently testing down vaccine in CMV C0 negative women with children in day-care. So it's going to be a proof-of-concept study fully funded by the NIH -- we have nothing to do with it -- but we'll obviously benefit from the data.

Children often get infected with CMV in the day-care sitting and transfer the infection to their mothers. If those females become infected during pregnancy, the fetus can be directly affected. The general CMV is the leading infectious disease cause of birth defects in the United States, just the way Rubella was going on the '40s and '50s.

And consequence of CMV infection during the first trimester of pregnancy can cause blindness, deafness, and mental retardation. And the seriousness of most of these indicators, the blindness, deafness and retardation, manifest itself much later before they are detected. So it's a horrible disease to get.

We have now built a strong franchise in the CMV field. As you know, we own a lot of gene sequence, CMV field, and with the licensure of the down strain, we have a pretty solid base of intellectual property in CMV. And provides us really broad options by addressing the congenital disease market, which is the last remaining big market after human papilloma virus in which Merck is making a lot of money these days.

Influenza. Our pan flu program, next I'll provide an update on where we are with this. Since our last conference call, we have made a significant progress and our now testing the vaccine at the highest dose of one milligram using both needle and needle free device. We are on track to complete enrollment in the 100 subject trial by first quarter of '08 and will have data by August of 2008.

So again, this trial has gone well. And remember, this is the first time in this trial we are testing Vaxfectin in humans. So we have gone through 0.1 milligram, had a safety pause. We are at a 0.5 milligram, we had a safety pause. And so far we have gone through Vaxfectin in humans; this is the first time this adjuvant is being tested in humans.

I'll remind you that our pandemic influenza is formulated as I told you with Vaxfectin adjuvant. Our previous animal studies have demonstrated potential utility with DNA vaccines against a wide variety of infectious diseases and its ability to provide dose-bearing advantages with conventional vaccines, both seasonal and pandemic influenza. Interest in this adjuvant continues to grow, and we are collaborating with a number of programs. So we are eager to release the results as quickly -- as soon as possible, particularly the human results, in our influenza study.

Now finally, I've come to the 2008 outlook. We expect our licensee, AnGes, to submit a filing for marketing approval in Japan for its angiogenesis product, potentially in the first half of year. That's what their party line is. However, the Nomura Securities which covers them and the Nomura Securities analyst -- what is the name, Mina Wantanabe -- in her report recently projected that filing could occur as early as late March or April. So we remain optimistic and we wait to hear from our partner when that filing occurs.

We expect an update by our licensee, Sanofi Aventis, on the ongoing Phase III trial for its FGF-1 angiogenesis product, particularly in terms of how the enrollment is going. We expect to complete our Phase I pandemic influenza trial as I mentioned. The enrollment will be completed in the first Q '08, and we shall have data by the end of August 2008.

We expect to complete an interim safety analysis, efficacy analysis, in our Phase II CMV vaccine, and data should be available some time towards the late fourth quarter of 2008. We continue with our focus on patient enrollment and expect to complete the geographical expansion of clinical sites in our Phase III trial for Allovectin-7, which is a very important product for us, particularly since we've been working on it for a very long time. And our partner is very supportive of this program and has funded this program. Again, it's our licensee, AnGes, which is also doing the program in angiogenesis.

And we also are awaiting data by the NIH some time to be published this year for their Phase 1 DNA vaccine for SARS. Everybody has forgotten SARS, but you know, there may be somebody who may disturb some of those (inaudible) [indicators] in China and SARS may be back. And we are one of the few companies, which -- I don't know -- a few -- probably the only company in the United States which is doing -- to my knowledge, doing a clinical trial in humans with SARS.

So we are pleased with the advances that we have made in all our programs this year so far, last year this far and so far in 2008, and we look forward to completing this process and delivering favorable results. That concludes my prepared comments. Operator, we are now ready to open the call to questions from my invited participants. Thank you.

Thank you, Mr. Samant. (OPERATOR INSTRUCTIONS) Alan Carr of Needham.

Good afternoon, everyone. One quick thing -- could you go over again what you are going to be looking at this interim analysis with CMV this fall -- or I guess end of the year?

Really three important things, when you compare the vaccine and placebo. We will look at viral reactivation, okay? If you see a significant reduction in viral reactivation in the vaccine arm, that is a big, big victory for us. Also, even if there is viral reactivation, how much of the total amount of antiviral therapy both arms are going to get, okay?

Because you may get them -- the way the standard of care is some hospitals, independent of viral activation, start patients on antivirals quickly, okay? So you'd be (inaudible) under the [curve] of the antiviral treatment that is required. And third is really the viral load, okay? Is there a low viral load in the vaccine arm versus the placebo arm? And those are the endpoints.

Okay. And then --.

And safety, of course, which is a very important element in this trial, okay.

Okay. And in your financial guidance for '08, you mention that the guidance includes anticipated milestones in equity investments from AnGes. Can you tell us a bit more about the scale of that and potential for dilution, that kind of thing?

No. You know, as we said, the total trial cost, which is going to spread over two to three years, is going to be about $22 million. And the way the trial has been designed, half the funding is coming in cash and the other funding is coming through equity. As you know, the first tranche of funding that we got from them last year, Jill, was what? $7 million?

[$0.9 million] --.

And that was all equity. What we got this year was --

$2.1 million.

-- was cash. And so, you know, we are not a publicly disclosed. But all our $23 million is half cash, half equity. And as the payments come, some are full cash, some are half cash, half equity. So I don't think it's going to be any huge dilution that we're talking about next year.

Okay. So can you characterize -- can you give me a little more clarity on that -- the amount that you might get this year then?

Well, it's dependent --

Or a ballpark, I suppose.

It's dependent upon our spending, but it's probably in the ballpark of about $6 million to $7 million.

Okay, that's what I was trying to get at.

Total cash and equity.

Okay. Good. Thanks very much.

Eric Schmidt of Cowen & Company.

Thanks for the comprehensive update. Vijay, just on the pandemic flu data which you targeted for August. Is there a specific scientific meeting in August that you have in mind or is that going to be a press release? Why specifically August?

We were debating it and Alan was pressing me why are you giving the specific dates, because a lot of people say, when is the data going -- you know, we're going to have to find this occasion to -- either it's going to be at a vaccine forum or the IDSA or an appropriate forum where exhibiting the data is going to be good. And we're going to have to look for the forum. If we can't find a top-level -- a vaccine forum, we may just provide a top-line data in some of our press releases, and hold the actual full data disclosure at an appropriate meeting. We have not found a venue yet, okay.

And then on the NIH HIV vaccine trial, do you have any better visibility than we do into whether that is going to happen now or whether that is off the table officially?

No, it's not -- actually, I was at the National Foundation of Infectious Disease dinner two weeks ago, and most of the players who are involved in this were there. I think there is a tremendous interest in trials. There are some naysayers. But there was a meeting in December where the agreement was to go forward with the trial. There's going to be a follow-up meeting of the expert group that is going to occur sometime in the next two or three months, which will be the final meeting and the trial will proceed. I think one thing for sure, the trial will not be one single trial of 8500 patients; may be broken up into two or three tranches.

Okay.

So the answer is, no. Everybody seems to be [at peace] so far as far as concerned people who are actually the clinical drivers for this trial.

And if it goes forward or doesn't go forward, your P&L is the same. You are not booking any more --

No, we got the $12 million, the goods have been transferred, you know, and they are in their hands.

Okay, thanks a lot.

Navdeep Jaikaria of the Rodman & Renshaw Company.

Good morning, Vijay and everybody. This is actually Sean Wu standing in for Navdeep. I have just a quick question. So I suppose you have a (inaudible) timeline for your pandemic flu data, because in the press release it said the first half. So you now have a more specific date -- it's August sometime?

No, no, the trial will be completed by the first half of 2008. There is a follow-up on the trial, okay? Actually we've improved from what we said in the press release. We are saying the enrollment now will be completed by March; there will be about a three-month follow-up. Remember, you've got to bleed these patients, then you've got to do the assays. It takes time. So I put a little aggressive timeline today than what we have in the press release.

So you do have like a (inaudible) gene therapy [comfort] around August, right?

I don't know. Normally, nobody -- in major conferences, nobody allows you to submit an abstract without any data. It's a Catch-22, right? So if we don't have a conference, we will announce something top-line if we have to, okay.

So, just a follow-up question on this. So now you have positive data and what is next?

Obviously, if the data looks good, we have the opportunity to go after funding to do a larger safety Phase 2 study, which is basically a repeat of the Phase 1 study. And look for opportunities of -- this is a very important proof of concept for DNA (inaudible) in humans (inaudible). All of a sudden, it opens up all kinds of applications which you been holding back on which you have not publicly disclosed, so maybe it will allow us to do something else.

Okay --

The outlook.

Okay. I would like to have a question on your melanoma trial. Now that the (inaudible) trial has winded down, basically it has failed, as I can tell. Looks like Pfizer is one of those. And if so, how -- do they make more patients available for you guys to recruit?

First of all, if you are hearing the information that the trial has completed recruitment, that is not what we are hearing, but that is good news for us, okay?

No, no, I'm saying their trial for -- (inaudible) trial and they are like -- so the Pfizer one is still recruiting, I suppose, right?

I thought it was the other way around --

Okay.

-- it's the other way around. So the point is just absolutely the rule of thumb is there are less number of people recruiting in the melanoma field, the better off we are. Also, you need to understand that we -- you need to look at each trials and their enrollment criteria. Their enrollment criteria are different; some have a much broader enrollment criteria; they take brain mets. We don't take brain mets. So there are operations who have very serious liver mets; we exclude both liver and brain mets.

So it doesn't translate one-on-one. But, you know, I think we are going after it in a very systematic basis. We are recruiting trials in the US, we have now gone into Canada. We are slowly going into key European countries and Brazil. So, I think it's just keeping your nose to the grinding wheel and making it happen.

May I ask a final question?

Sure.

You have talk about AnGes' plan to file for Japanese approval like early this year or late this year. Do you have more information about their plan in the US, how are they going to move forward with their PAD program here?

All I can tell you is they are very excited about the US opportunity, that they are making plans to do something in the United States which they have not publicly disclosed. But their first priority right now is to get this Japanese application done. And I just mentioned that the Nomura guys, an analyst that covers them intensely has said they will file sometime in April. Our party line is second quarter is what (inaudible). But if that occurs -- if that occurs, we'll be pretty excited.

But just want to remind you something about the US, they have already completed two Phase 2 trials in the United States for PAD. Did you know that?

(inaudible)

So if and when they go to the United States, they will be -- at the start of this trial, they will be going directly into a Phase 3 trial.

So, yes, I'm aware of that. That is like they are going to -- they also are trying for (inaudible) indication here, right?

No, similar indication here.

Okay.

All right. Thank you.

Davis Bu of Goldman Sachs.

Hi. Thanks for taking the questions. First, on the Towne strain for CMV. You mentioned the NIH steady. Is that using just the Towne strain alone, is that in conjunction with DNA vaccine or using any of your technologies?

It is Towne strain alone.

Okay, great. And can you remind me, do you have an exclusive license for the Towne strain?

Yes, we do.

Okay. Do you have any plans to incorporate the Towne strain into your other CMV programs?

No, not in our bone marrow transplant study, because it's well underway. I think -- two things we -- we acquired this intellectual property because the Towne strain has been used so extensively in humans and has been found to be pretty safe, okay? Live attenuated vaccines always have the danger of causing the disease.

So since the intellectual property was available we acquired, because we heard that the NIH is conducting a large study and that data looks good, then we can either go with that data on its own and piggyback on that study, or we can do a DNA prime versus a CMV Towne strain (inaudible) in the congenital setting. So we have two options, okay. But there's no rush to get into that program.

We also have to look at how flu data looks. If our flute data with Vaxfectin looks -- and gives us spectacular results in influenza, that could be a path on its own, okay.

Okay, great. Thanks. I had one other financial question as well. Do you -- with all the news on auction rate securities, do have any exposure to auction rate securities?

Jill, you want to talk about that?

We have a very small portion invested in auction rate securities. About $8 million is invested in auction rate securities. But with the ending cash balance of over $70 million, that still allows us to have enough liquid cash, because it is just a liquidity issue. The auction rate securities that we have are backed by AAA-rated municipal bonds and student loans that are backed by the Department of Education. So, we feel confident that this issue will resolve itself. And in the meantime, we have sufficient liquidity to get through the next year plus.

Great, thank you.

(OPERATOR INSTRUCTIONS) Brian McCarthy, Merriman, Curhan, Ford.

Hello, thank you. My first question involves the Sanofi Phase 3 PAD trial. I wonder if you had any updates regarding their enrollment. And second, whether or not you expect that they may release interim results at any point.

We have not received any update on enrollment. But all I can tell you -- and I can actually send you a link -- they are doing a lot of market development. There are a lot of television spots, both on the East Coast and in California, where they talk about PAD disease, when they advertise this trial.,

So in terms of trying to promote recruitment, they are also kind of making people aware of this PAD disease. I don't think there's going to be any interim analysis, but based on their filing, in 2010 is what they have said, we expect the data sometime to be available in '09. So you know, that is not too far away.

Okay. And then one last question regarding Merial and any information on the uptake of the canine melanoma vaccine?

No, we should get reports -- the first reports on the sales in the first quarter of this year. So by next earnings call, we should be able to tell you how everything is going. We have not heard yet also in terms of how -- what progress have they made toward converting the conditional approval to full approval. But we assume they are on track and we should be meeting with them sometime early second quarter to review the progress of the program. But no news so far from them on this -- on terms of royalties.

Okay, thank you.

And having no further questions, I will now turn the call back over to Mr. Samant.

Thank you for participating in this call and we look forward to seeing you in the near future, all of you. Thanks.

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