Brickell Biotech Inc (BBI) 2008 Q1 法說會逐字稿

Good day, everyone, 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 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. Allan Engbring, Executive Director of Investor Relations. Please go ahead, sir.

Hello, everyone. Welcome to our first quarter 2008 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 program, that are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including the risks set forth in Vical's Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, as well as the specific risks and uncertainties noted in Vical's news release on first quarter 2008 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 to all of our listeners. We had a very good first quarter with significant progress in each of our independent programs, and a major milestone in our angiogenesis partnership with AnGes. I'll provide a [inaudible] on these key events and confirm milestones for the remainder of the year. The highlights of our quarter was the NDA filing in Japan by our partners at AnGes for its angiogenesis treatment. The treatment is called Collategene, for PAD. This filing was completed in late March, and assuming all goes well, Collategene has the potential to become the first approved product for human use based on our technology.

In our Phase 3 Allovectin trial, we continue to expand our network of clinical sites in North America and Europe and focus on patient enrollment, which is on track for completion by middle of 2009. We continue to enroll our Phase 2 CMV vaccine trial after passing the halfway point in the first quarter, that was 40 patients. We will conduct an interim efficacy analysis in the second half of the year. We completed enrollment in all planned dosing in our Phase 1 pandemic influenza vaccine trial; and as we told you in the last quarter, we will release preliminary data by August of this year. We also received a $2 million grant for development of a therapeutic vaccine for Herpes Simplex 2. I will provide more detailed updates in each of these key programs and other recent developments, but before I do that, I want to turn over to Jill Church, our CFO, to review our first quarter financial results. Jill?

Thank you, Vijay. Earlier this morning, we reported first quarter 2008 results, which were consistent with our first quarter 2007 results and on track with our expectations for full year 2008 net loss and net cash burn. Note that our losses in cash burn in first quarter reflect the timing of revenue recognition and cash payments. The first quarter results also reflected the ongoing activities in all of our clinical stage development programs, including our Phase 3 trial with Allovectin 7, our Phase 2 trial of our CMV vaccine, and our Phase 1vtrial of our pandemic influenza vaccine. We ended the quarter with $60 million in cash, which is sufficient for our anticipated needs through at least 2009. I will now turn the call back to Vijay, who will provide an update on our key development programs.

As I told you, it is been a very good quarter for us -- thank you, Jill, for that financial update. I will start today with the Japanese/India filing by our partner, Anges. We were expecting this filing the second quarter and was surprised that was completed by our partner in late March. This filing represents a major milestone for our technology. It's first potential approval for human use as well as the nearest [inaudible] potential for royalty revenues. Collategene, the brand name chosen for this angiogenic treatment, is being pursued initially in the Japanese market for Critical Limb Ischemia, an advanced form of PAD. This product approval is subject to the Japanese regulatory process, but we believe it will occur within the next 12 months. While preparation of the Japanese NDA has dominated the activities at our partner, AnGes, over the past several months, AnGes, which has already conducted two Phase 2 trials in the United States, is currently in the planning stages for a pivotal Phrase 3 trial in the United States. Our second angiogenesis partner, Sanofi-Aventis, is conducting a [inaudible] patient Phase 3 clinical trial in the United States, Europe and other key international markets. Unlike the AnGes trial, which evaluated wound healing and pain as the primary end points, the Sanofi-Aventis trial is tracking the number of amputations in patients receiving treatment compared with those receiving placebo. This was clearly demonstrated, and I think it's statistically in the completed Phase 2 trial. Sanofi is projecting a DNA filing in 2010. In addition, both AnGes and Sanofi-Avanti product candidates are initially targeting advanced PAD, but could expand to early stage disease if this treatment gains market acceptance.

Even though both of these treatments are delivered by the same Vical technology, we believe they could be potentially used in combination, since they encode different angiogenic growth factors. Both programs would generate milestone payments if they advance. The angiogenesis segment is potentially one of the largest unserved markets, with 10 million people affected by PAD in the United States alone, and the U.S. healthcare [inaudible] amputations in excess of $10 billion annually. If one or both of these products are approved, Vical could receive substantial royalties. Next, I will move to our independent development programs, beginning with our lead oncology program, Allovectin 7 for metastatic melanoma. Interestingly, the competitive landscape for metastatic melanoma has changed significantly since our last call, as two product in the late stage developments have borne major setbacks, and we believe that those are positive implications for Allovectin 7. In early April, Pfizer discontinued its Phase 3 trial of its anti-CTLA4 monoclonal antibody because an interim review determined that it could not demonstrate superiority to the chemotherapy control. This was a 655 patient trial that combined Pfizer's antibody, which is dacarbazine or TMZ with overall survival as the primary end point.

In late April, Medarex and Bristol-Myers Squibb announced the decision to delay filing of the BLA for their anti-CTLA4 maab to provide additional overall survival data and evaluate the potential change in the Phase 3 primary end point from progression free survival to overall survival. This is the 500 patient trial comparing dacarbazine with Medarex antibody, which is dacarbazine alone. While there are subtle differences between these two antibodies as claimed by the companies, and clear differences in trial designs, certain facts and conclusions apply to both. Both products claim to have some degree of activity against melanoma, or they would not have advanced to Phase 3 testing. Both of these products are immunotherapies, like Allovectin 7, which take more time to work than chemotherapies like dacarbazine. And so the key to success in immunotherapy trial is patients have to survive long enough for these immunotherapies to work. Both these trials enrolled patients with advanced metastatic melanoma, stage 3, 4 melanoma, including patients with visceral mets and elevated LDL scores, both of which are associated with poor survival. The Pfizer trial allowed LDH course up to two times normal and the Medarex trial had no restriction LDH. Both these trials excluded patients with brain mets, but neither had any restrictions in visceral mets. In our Allovectin 7 trial, we have directly addressed these issues by tightly restricting the patient inclusion and exclusion criteria.

The trial does not allow patients with any mets except in the lungs. We require and LDH score of one times normal or better, which experts believe is an indication of the healthy patient population. I understand there's actually a school of thought that there will be some reclassification in terms of how stage 3, 4 melanoma is going to be classified using LDH as an important marker in treating those classifications. I was with John Kirkwood last week at the University of Pittsburgh, and he's a leading expert and he's leading that effort. We also measure the response rate, the primary end point after six months or longer, which allows three full cycles of Allovectin 7 treatment. This end point should capture the advantage of durable responses provided by immunotherapy in contrast to more rapid but short lasting responses by typical chemotherapy. Metastatic melanoma patients treated with dacarbazine in the control on previous studies showed durable response [inaudible] rates as low as 1%. In our Phase 2 trial, the 12% of patients who responded to Allovectin 7 were still responding in six months. So we are really in our study treating patients with LDH of one or less, and very limited visceral mets other than lung.

We believe we have a well-designed trial that can support approval of Allovectin 7 as first line therapy for advanced metastatic melanoma. We currently actively are recruiting patients at sites in the United States, Canada and Europe, and are on track to complete the enrollment by middle of 2009. Next, I will provide a quick status support on our CMV vaccine development program. The big pharma success with HPV vaccines has increased interest in vaccines for prevention of congenital CMV disease as the next big target for adolescent females. We chose CMV as one of our original ID targets for practical reasons as well. The initial focus for this vaccine is in bone marrow transplant patients or susceptible to CMV deactivation. The high CMV disease incidents in this patient population provides an excellent opportunity for small, quick, proof of concept study. In addition, the biology protection for CMV is well understood.

We know which antigens are important, how to direct the proper type of immune response against those antigens. To secure our position in the broadest CMV indication, we have built a portfolio by end licensing or acquiring CMV-specific intellectual property. For example, we have licensed rights to use specific genes using our CMV vaccine. We also acquired exclusive rights for the [inaudible] in the CMV from the [inaudible]. And our Phase 3 trial for hematopoietic cell transplant patients, enrollment is continuing at a good space, and we are on schedule to complete an interim data analysis covering more than half of the total planned planned patient population in the fourth quarter of 2008. The interim analysis will evaluate vaccine versus placebo groups for marked efficacy markers, including frequency of viral reactivation, total antiviral therapy, viral load and importantly safety, which is key in this particular trial. We have what we believe is the most clinically advanced CMV vaccine program for transplant patients. We have secured an offer drug status for the use of vaccine in transplant setting; demonstration of safety and efficacy in addressing this important initial indication would position us well to expand into a larger congenital CMV disease market segment.

Next, I will provide an update on our pan flu program. Our Phase 1 trial now is fully enrolled and all subjects have received both vaccinations. We are collecting and analyzing samples from immunized volunteers according to a strict schedule and we will be reporting [inaudible] results by August as we told you at the last conference call. As a reminder, our pan flu vaccine is formulated with our Vaxfectin adjuvant. This trial is the first use of Vaxfectin as an adjuvant in humans. Vaxfectin has demonstrated its efficacy advancements and dose [inaudible] ability in animal models, with DNA vaccines against variety of infectious diseases and with conventional vaccines against both seasonal and pandemic influenza. The pan flu antigen is being tested in our Phase 1 trial of [inaudible] with conventional vaccine technologies. If our vaccine demonstrates better immunogenicity than approved pan flu vaccine, this would be a major step forward for our DNA vaccine technology and should further drive interest in our technology as well as Vaxfectin. We are already working with a number of corporate and government collaborators to test Vaxfectin in their own vaccines.

The last topic I want to cover today is a $2 million grant we received from the NIH to develop a vaccine to treat people already infected with Herpes Simplex, specifically HSV2. This sexually transmitted virus is the leading cause of gentile herpes and is a life long infection that cannot be cleared. Currently [inaudible] involving chronic use of antiviral drugs is costly and counterproductive, contributing to the emergence of drug-resistant strains and rising infection rates. We are excited to to be working on this project with leading researcher in the herpes spheres, especially Dr. Larry [Corey's] lab at the University of Washington, which has the expertise and the tools to support this vaccine development, including appropriate animal challenge models. The HSV vaccine will be evaluated with our Vaxfectin adjuvant. The funding is sufficient to get us to an IND filing for this particular project. The 2008 outlook, we have a number of important milestones coming our way. We expect our licensee AnGes to continue with preparations for commercialization of Collategene in Japan and advance planning for Phase 3 trial in the United States.

We expect an update by our licensee Sanofi-Avanti on the status of its Phase 3 angiogenesis trial. We expect to release data from our Phase 1 pan flu trial by August, hopefully at an important vaccine conference. We expect to complete an interim efficacy analysis on our Phase 2 CMV vaccine trial in the second half of 2008. Just a reminder, it's a double-blinded efficacy study, so it's going to be very important ata when it comes out. We expect to continue our active recruitment of patients in our Phase 3 trial for Allovectin 7 with the goal of completing enrollment in mid-2009. And finally, we expect public issue of the data by [inaudible] to the results from its Phase 1 trial for DNA vaccines in SARS. You know, we now own the IND for SARS. We are the only Company that we know in the world that has done a Phase 1 study humans in SARS, and hopefully SARS is going to come back one of these days, which I believe it will, and we'll be poised to move on with this program when that occurs. That concludes my prepared comments. Operator, we are now ready to open the call for questions from my invited participants. Thank you.

Thank you, Mr. Samant. (OPERATOR INSTRUCTIONS). Our first question comes from Alan Carr at Needham.

Hi, good morning, everyone.

Hi, Alan.

I want to -- I was wondering if you could give us some more information on Collategene; what are the next steps and the timelines for approval and launch in Japan?

Well, first of all, you know, it's only a 40 patient study, okay? And so that data of those 40 patients, 27 are treatment and 13 are placebos. So the review of that data by the agency should not take very long, okay? It's not like you're submitting a 6,000 patient portfolio where you are looking at a whole bunch of adverse events and things of that sort. So the data set is very small. So the review of data by the Japanese agency shouldn't take a lot of time. Our partner has been working with some of the major opinion leaders in Japan and some of the key P80 centers in Japan. So the commercialization should not be a problem; and, remember the commercialization in Japan, we would be done by AnGes' partner, Daiichi Sangyo, which the second largest pharmaceutical company in Japan. So everything bodes well in terms of how this is going and the fact that somebody has filed in Japan shows a lot of confidence, okay, on a small number of patients.

Is this realistic to assume that this is something that if approved would launch in early '09?

You know, that's what I told you. You know, the Japanese regulatory process is unpredictable, but this company has a very good relationship with the agency. That's why I hedged, I said anywhere up to about 12 months is what my guess would be.

Okay. And can you give an update on the canine melanoma vaccine? Where is that in terms of -- I know it got a conditional approval. Has that status changed? And how is it -- how is it doing in the market?

First of all, it has conditional approval. That means it has been given limited distribution. There's no real trade market. It cannot be advertised on TV. I think there are about two dozen vets around the United States who can prescribe it. The commercialization of it has been slow. I think we have received royalties to the tune of -- Jill, what so far?

About 100,000.

$100,000. So, hey, it's going well; but I think the key time point is coming up sometime in the July/August period when that one-year follow-up data will be submitted. And if they get full approval, then it will be widely available in the United States and you will even see some commercials on the television. So that could be the important commercial opening for this product, okay?

Okay. Good. Thanks very much.

Next we'll move to May-Kin Ho at Goldman Sachs.

Hi, May-Kin.

Oh, it looks like he may have put his phone on hold. Oh, there he is.

Hi, this is Davis [inaudible] in for May-Kin Ho.

Okay. Hi, Davis.

So a couple of questions. First on Collategene. Have you -- so what are the royalties that you will be receiving?

We said before, the royalties both for the Sanofi and our Japanese collaboration are mid single digits.

Right. Okay. And for the -- I was wondering if you could also give us an update on -- on PAVE and where that stands.

Excellent question. You use an acronym that some of our members in the audience may not be familiar. PAVE is the large HIV Phase 2 trial that NIH is planning to conduct. Which we made, as you remember last year, a DNA vaccine to the tune of $12 million for an 8,500 patient study. The constant that NIH is using, just for clarity, would be three shots of DNA, three injections of DNA in priming mode, followed by a boost with adeno. So the PAVE trial has a lot of questions that have come up because the failure of the step trial that Merck, was doing which was only an adeno trial. So they were primary adeno and giving an adeno booster. In that particular trial they found that the placebo arm did better than the vaccine arm in the prevention of infections.

So the entire intellectual thinking behind HIV vaccine trials said, let's pause, look at what the Merck data showed before we rush in to do another major trial. Now, fundamental difference between both those two trials are the Merck is a adeno/adeno. Maybe in some cases two doses or three doses. And what has occurred in that trial, what the experts are saying is the preexisting immunity to [ad 5], created decell activation and decell activation actually facilitated the entry and replication of the virus. So people are looking at the Merck data and an expert group is meeting. The expert group is supposed to meet on the 30th of May. This is an open, public meeting which will be held in Washington to review the differences between the Merck concept and the PAVE concept, which is the NIH or the VRC trial, before a decision is made, and this will be an expert committee of a dozen people and it's going to be about another 30 or 40 people who are invited. It is a public meeting. We have some time, early June. I think the decision is not so much whether they should go forward with the trial, but the size of the trial and where the trial is going to be conducted. Does that answer your question?

Yes. Yes. Thank you. That's very helpful. Finally, just kind of as a housekeeping question. I was wondering if you could give us an update on your exposure to auction rate securities?

Jill, you want to tell him?

Yes, sure. At the end of the quarter, we held about $8.5 million of AAA rated auction rate securities that were backed by municipal-type bonds and student loans. The underlying investments are still very sound and as you know, liquidity is temporarily limited. In accordance with FAS 157, companies that hold auction rate securities are being required to fair value those instruments. So we have calculated the fair value of that. That's reflected in the balance sheet that's included in the press release. We have a temporary write-down of those, that was less than 4%; and we will have have full disclosures with regard to that calculation in our 10-Q.

You know, Davis, we use a very sophisticated financial model with a variety of inputs. I think the underlying securities are very sound, but FAS requires we've done what needs to be done and we are not concerned about this.

Okay. Thank you very much.

We'll go next to Eric Schmidt at Cowen & Company.

Hi. Vijay? Hi. Let's suppose that you get to the safety and the immunogenicity that you're looking for out of the pandemic flu vaccine in August. What are the next steps?

I think multiple steps. First of all, if we get data on safety and immunogenicity, remember, the [inaudible] vaccine was approved within zero conversion of 40%. That's the only vaccine that approved. And as you saw about a month ago, they got a contract for about $260 million -- another contract, okay, and that vaccine only has a shelf life of 18 to 24 months. If we get data -- not 40%, but I'm talking 40% would be good, but if we get data in the 60 to 70% range, boy, that's blockbuster data because we have demonstrated first time, with DNA from delivery technology with Vaxfectin, in a poorly immunogenic vaccine with conventional technology, what they can't produce we have produced in two shots and beat them what they have not been able to do. So it's a huge victory for the platform, along with the fact that Vaxfectin now has allowed and enabled DNA plasmids to do something that we have not been able to show before. So a big victory for the platform, a big feather in the people who have been working at Vical for a number of years to make that happen.

Having said that, the next step will be we'll be going to the government and conducting a Phase 2 -- getting money for a Phase 2 to do a trial for the vaccine, trial evaluation unit, and that study primarily is a safety study, okay, [inaudible] would require immunogenicity, and then that will enable us to -- enable us to be a part of this stockpiling effort as the government continues with it. We also intend to show, by the way, not just the immunogenicity with H5, but we'll also show decell response to nuclear protein. We should also show decell response to M2 and also antibodies to ectoregion on M2. So we hopefully want to demonstrate, it's not that we are more immunogenetic but, A., we can even afford better cost protection. That's the goal. Now when we actually believe the top line data, it's the top line immunogenicity data but eventually when the core data will will be released, all those other factors will be introduced. So the next step with flu would be to go and get the government funding.

We actually have the chance to do the Phase 1 trial in the vaccine trial evaluation used, but we decided against it because it would have taken a long time. But the second study is a the largest study and we are going to have to get their funding and their trial network to do it. Okay? And the other thing is that data along with -- as we say today in our conference call, we are working with almost -- I guess, 10 or 12 people, academics and companies on user Vaxfectin, both DNA and conventional vaccines. This really accelerates our collaborative efforts with them, okay. Because this is real human data. Most of that work is being done in animal models right now, and this is will be the first human data to show Vaxfectin works, okay? And, you know, our intellectual property for Vaxfectin covers both conventional vaccines and DNA vaccines goes for a very extended period of time.

And does the government actually have outstanding grant money or RSPs out there to conduct additional studies or to support additional stockpiling, or will you have to --?

There's a variety of ways to get money from the government. You can go and apply for a direct Phase 2 grant. You can actually conduct the trial through the vaccine trial evaluation unit. There could be additional base coming out from Barta, which is another agency, whose initial [inaudible] that came out of our -- beginning of this year. So there are a variety of opportunities. The government is very concerned about pan flu -- and don't forget, our single largest shareholder is Temasek in Singapore, okay? So you know, we would love to do a study in that part of the world, but, you know, we are not going to say what we are going to do until we have the data [inaudible] Singapore to conduct such a study in that part of the world.

Okay, thank you.

(OPERATOR INSTRUCTIONS). We'll go next to Brian McCarthy at Merriman Curran Ford.

Hi, good morning.

Hi, Brian.

Hi. Some of my questions have been answered, but I do want to ask about any potential news flow around the Sanofi Phase 3 trial. I realize the BLA filing could be as far out as 2010 with a pivotal data of probably in 2009. But is there any scheduled interim looks or anything we could look forward to?

I don't think there are any interim looks. I think the best we are going to give you is progress on the trial. But, you know, 2009 is just around the corner. This year has really flown. So they are going to file in early 2010 and they are going to have six month follow-up and six months to file. So you would expect data coming out early '09. The schedule on [inaudible] is on schedule. They haven't told us exactly when the data will be released, but I'm guessing, okay?

Okay. Thank you.

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

Well, ladies and gentlemen, this concludes our conference call for today. We hope to see you all soon. Thank you.

And that does conclude our conference. You may now disconnect.