Brickell Biotech Inc (BBI) 2008 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'd 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 would now like to turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, sir

Thank you. Hello everyone. Welcome to our fourth quarter and full year 2008 financial results conference call. Participating on the call today are Vical's President and Chief Executive Officer, Mr. Vijay Samant, and Vical's Chief Financial Officer, whose name recently changed from Ms. Jill Church to Ms. Jill Broadfoot. 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 the specific risks and uncertainties noted in Vical's news release on fourth quarter and full year 2008 financial results. These forward-looking statements represent the company's judgments as of today. The company disclaims 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 our participants.

We will start with an update on progress in some of our key programs. We will wrap up our call with the detail financial review and forecast by Jill Broadfoot our Chief Financial Officer and open up the call to questions. I'll begin with the recent highlights on our CME vaccine program. Just a week after our call in November we announced the completion of enrollment in reported interim immunity data from our CMV vaccine Phase II trial in stem cell transplant recipients. In a related significant development last week was the failure of the antiviral drug Robavir to achieve the primary or the key secondary endpoints in its Phase III trial. This antiviral drug did not demonstrate statistically significant differences versus placebo for the primary end point of reducing CMV disease or for the key secondary end points. We believe this failure highlights the continuing need for a vaccine to address the shortcomings of the current treatments for this high risk patient population.

Let me take a minute to review the design and goals of our trial and then move on to our outlook. Patients undergoing bone marrow typically are suffering from advanced cancers of the circulatory lymphatic system. These patients typically receive a transplant from a healthy donor, which can start to rebuild their immune system. The transplant recipients are treat width immunosuppressive drugs to prevent rejection where suppression of the immune system frequency allows latency to reactivate, causing serious medical complications during the recovery period. Our vaccine is intended to reduce and hopefully eliminate the need for antiviral drugs to control CMV during this period.

In November we completed the enrollment of the full 80 subjects and reported on interim immunogenicity analysis for the first group of 33 recipients. The results indicated significant advancement of CMV-specific immunity as measured by DTIC responses to both CMV antigens, targeted by the vaccine VP-65, which is an internal antigen and GB, which is a surface antigen. Both with p-values of less than 0.05. These results are encouraging because independent publications have shown that increased CMV-specific t-cell responses following the bone marrow transplant are at a predictable favorable outcome as measured by end points such as limited levels of active CMV and reduced CMV disease.

In the second quarter of 2009 we plan to report expanded safety and immunogenicity results and initial clinical efficacy results on the full cohort of transplant recipients after a four-month fall-off. The efficacy analysis will compare vaccine versus placebo groups using multiple efficacy markers including A., frequency of viral reactivation, B., total antiviral therapy, and C, viral load.

We believe these endpoints are key indications, are key indicators of patient benefit for bone marrow transplant patients. The successful launch of Merck's Gardasil for the prevention of HPV or human papilloma virus demonstrated the size of market for vaccine to protect adolescent females. Prevention of congenital CMV is the next significant commercial vaccine target for this demographic. Among those of greatest risk for CMV Are infants born to mothers who are infected during pregnancy, especially during the first trimester. Congenital CMV is the leading infectious disease cause of birth defects in the United States, similar to rubella in the '40s and '50s.

Infants born with CMV infection can be affected by blindness, deafness and mental retardation, and these consequences are frequently undiagnosed until the child reaches several years of age. Widespread vaccination has the potential to reduce significantly or even eliminate congenital CMV over time. We believe the best approach for this market segment is an antibody-focused mono-LMB vaccine encoding the GB antigen, one of the two antigens currently used in our transplant vaccine. We intend to formulate this vaccine with the same broad-spectrum antigen used in our successful pan flu vaccine trial. We are actively validating opportunities to move forward with a program and are under discussions with experts for the development for a proper clinical trial design.

Next, I'll provide an update on our lead independent product development program, our Phase III registration trial of Allovectin-7 in patients with advanced metastatic melanoma. Funding of the Phase III trial is provided by AnGes MG, our partner for commercialization in Asia, we recently reached a cash payment of $2.3 million bringing the total cash plus equity received to date to $17.6 million of the $22.6 million committed by AnGes. In December, we announced a sales and marketing agreement for Allovectin-7 in Turkey.

Our Turkish partner, I have difficult pronouncing this name, Eczacibasi, is the leading pharmaceutical company in the region, and has a successful track record in the multiple licensing agreements with major biotech and pharma companies including Amgen, Pfizer, Proctor and Gamble and Sanofi-Aventis. Eczacibasi will help us initially with patient recruitment in Turkey and then with regulatory approval and commercialization of the products. The agreement is a logical extension of our efforts overseas where we are making good progress recruiting patients as we continue to expands to clinical sites across western and eastern Europe and Turkey and is Israel. We expect to open several sites in Brazil within the next month and with our sites in the United States and Canada, will have more than 100 sites recruiting in key locations worldwide as we advance towards the final months of enrollment. Based upon the trends across these regions, we are confident that we would be able to complete enrollment in this pivotal Phase III trial by the end of the current year.

After completion of enrollment, the follow up period is fixed, and the trial end point is durable response rate is well defined under the terms of our SPA. If we beat this endpoint we should easily qualify for a fast track review by the FDA which should minimize the post trial time to product launch. We believe that Allovectin-7 has the potential to offer an attractive alternative to patients with metastatic melanoma where no new first line therapy has been approved in the last 15 years.

I'll now move to give you a brief update on our pan flu vaccine program. We initially reported in July that our monoviral vaccine achieved potentially protected levels of H5N responses in at least 50% and up to 67% of the available subjects in a high dose cohort of 100 subject Phase I trial. These responses are in line with result of inactivated protein-based H5N1 vaccines which is a real breakthrough for our DNA vaccine technology. We subsequently reported that in two vaccine cohorts receiving the highest 1 milligram dose of H5 DNA, 80% to 100% of the responders had sustained responses through day 182, that's about six months. Durable responses could be important for sustained protection during a pandemic.

We also reported that our monoviral vaccine induced antibody responses against strains of H5N1 influenza from two different plays, representing broad cross strain reaction to say our vaccine. Cross strain responses could be important providing protection against the emerging strains of influenza before a matching vaccine could be developed. Our monoviral vaccine formulated induced H5B5 responses in 75% of to 100% of subjects in the various cohorts. These cell responses could be important in protecting against serious disease and in limiting the spread of the disease during an outbreak. Our traveling vaccine encoding the Vietnam H5 antigen plus antigens Nuclear Protein and M2, this vaccine induced antibody and t-cell responses in 72% of the subjects.

The responses against antigens could provide protection against serious disease or death during an outbreak of a new strain influenza for which a matching vaccine has yet to be developed. We are seeking funding for further development of this vaccine with multiple objectives. We believe we can further optimize the vaccine dose and formula ratio, confirm the safety and immunogenicity in a large number subjects and leverage this group of concepts for the vaccine platform into additional applications such as congenital CMV. We are currently exploring potential funding sources for further development of this program.

Rounding out our news since the last call, we had several important developments in partner programs. Dengue. We announced collaboration with the US Name and US Army A early to conduct a preclinical and Phase I evaluation of a dengue DNA vaccine formulated with our Vaxfectin adjuvant. Dengue virus infects up to 100 million people each year and no effective antiviral drugs and vaccines. As many as half a million people develop severe dengue disease during each year causing tens of thousands of deaths especially where healthcare is limited. The US Government's program is intended to develop a vaccine to protect troops being deployed in dengue endemic regions. Our goal here is to manufacture the vaccine and the Vaxfectin adjuvant under a $1.3 million contract and provide regulatory and clinical expertise to the US Navy.

In December we announced receipt of $1 million milestone payment from America based on the planned initiation of Phase I plasma DNA cancer vaccine trials. The new vaccine includes H-Turt, a form of human telomerase and will be validated in patients with broad range of solid tumors. Merck also has a cancer vaccine trial that uses a DNA vaccine including H-Turt 2 and CA and the trial is still ongoing. We also announced publication of results from an NIH Phase I trial of a dna vaccine for SARS. These results demonstrated the vaccine was well tolerated and induced neutralizing antibody responses in 80% of the subjects and decel immune responses in all the subjects. This was the first SARS vaccine human clinical trial conducted in the United States and it was initiated with unprecedented speed. Since the completion of the trial, the NIH has transferred the IND back to Vical and we have the option to continue development of the vaccine when a medical need arises.

Next, I'll ask Jill Broadfoot, our CFO to review our fourth quarter and full-year 2008 financial results and our financial outlook for 2009. Jill?

Thank you, Vijay. During the fourth quarter, it became increasingly apparent that the financial markets were not likely to recover in the near term. We concluded that we needed to pursue and confirm potential sources of revenue, rationalize our activities and reduce our spending to make our available capital last as long as possible without compromising the scope or pace of our key development program. On the revenue side, we continue to look to our collaborations, and to a lesser degree our contract manufacturing activity. In the fourth quarter we received $1 million milestone payment from Merck related to the start of a new Phase I cancer vaccine trial. We also announced a $1.3 million dengue vaccine program for the US Navy and US Army that will involve contract manufacturing, regulatory and clinical support.

On the spending side, we announced in late November a strategic restructuring that included a 20% workforce reduction, and the early closure of a research facility. The primary benefit of the restructuring is a reduction of our cash burn by approximately $4 million per year. Our efforts are now focused on our two late stage product development programs, Allovectin-7 and our CMV vaccine and our near term goal is to advance these programs toward the achievement of key milestones.

We reported financial results today for the fourth quarter and full year 2008. These results included a $0.8 million restructuring charge and the recognition of a $1.1 million loss on our long-term auction rate securities. Even with these charges, our results were within our forecasted net loss range. Without these charges, our net loss would have been $35 million, near the middle of our forecast range. Our net cash burn was also within our forecast range and we ended the year with $42 million in cash. For 2009, our projected net loss is in the range of $24 million to $28 million our projected net cash burn is in the range of $19 million to $23 million. We believe that our current cash balance, coupled with anticipated revenues and spending is sufficient to last through 2010. We expect that between now and then, continued progress in our programs and some degree of recovery in the financial markets will allow us to extend that cash run rate even further.

I will now turn the call back to Vijay.

Thank you, Jill, and in conclusion, we look back to 2008 as the year of great progress for the company and look forward to the remainder of 2009 for a sees of significant milestone in both our independent and partner programs. We are managing the business to stretch our cash through these difficult economic climate while continuing to drive key programs forward. That concludes our comment. Operator, we are now ready to open the call to questions from invited participants

(Operator Instructions). First question will come from Stephen Dunn, with Dawson James. Please go ahead sir.

Thanks for taking my questions. I guess I'd like a little color on your opinion of ViroPharma's disappointing with Miribovir compared to Vical's vaccine. Could you give us some color, compare and contrast on what happened?

I think first of all there's a fundamental difference between their program and our program. Their program is an antiviral drug which was used essentially in combination with the current antiviral treatment which was given post transplantation, which is gancyclovir. So their goal was to give their drug pretransplant and give gancyclovir post transplants and both are using basically the same mechanism which is an antiviral mechanism which is basically a chemical mechanism. Ours is more of a biological mechanism. We're teaching the immune system to detect CMV and control it, and protect against infection.

With antivirals, you are stuck with antivirals. Any time there's an outbreak you have to go back to antivirals and with that you get associated toxicity. With a vaccine, once you get it, you have lifetime immunity against that particular infection. So completely two different approaches. We believe CMV is a hard disease, and antiviral is not the solution for protecting against CMV. And the vaccine is the best way to go forward

On the congenital CMV, are you looking to vaccinate girls as they reach puberty or I'm making sure you weren't looking to vaccinate within their first trimester.

No, I think the goal would be to make it a routine vaccination program for adolescent females so you are protected and not wait. I think by the time you reach the first trimester of pregnancy is too late. Conducting a clinical trial trying to give vaccination to females already pregnant involves a whole huge risk associated with, and the time frame of dealing with that vaccine trial. The best way is to show that you give adolescent females the vaccine and give them CMV immunity from the very beginning

I want to jump over to H5N1 a little bit. Trying to read between the lines, are you going, is Vical going to progress into Phase II by itself or are you requiring a partner to fund that?

No, we have said this in the prior call. We would not go ahead independently on a Phase II trial until we get funding from a partner or from a government or nongovernment organization because really the market for pan flu is the federal government, and we are not going to spend shareholders' money to do that. It it was great for us to get money from the US Government because it allowed to us validate the use of Vaxfectin in humans but to go to the next stage we are expecting money from a third party source, not Vical funding

Would it be safe to say SARS is the same situation

SARS is absolutely the same situation. If, the beauty of SARS is we have the IND in our possession. We have Phase I trial has already been conducted. The vaccine is safe. It's immunogenic, it invokes antibody responses, it invokes decent responses to all the people, if there's an outbreak of SARS we are the shop that everybody is going to come and say, okay, can you make the vaccine if there's an emergency approval needed. Okay

One more question and I will jump back in the queue, we are expecting enrollment to complete by the end of this year in your Phase III for melanoma. How long before we would see topline data?

If the trial concludes by the end of the year at least six months of follow up data means the patients are to be followed by six months. So you would see data sometime, Alan you jump in towards the ends of next year

Late next year

Yes, late next year

(Operator Instructions). We will take our next question from Alan Carr with Needham and Company,

I may have missed this but could you tell us a bit more about what sort of data you are going to be getting around this CMV trial in the second quarter?

Okay. Well, we just covered that in a minute but I will go through it. The key things you are going the see, we are going to see the three efficacy markers of frequency of viral reactivation, how many times you get a viral breakthrough in those patients comparing between again the vaccine and the placebo, that's one of the first end points that we've been looking at. Looking at the total amount of drug or antiviral therapy that's used between both groups, okay? That would be a clear indication of the efficacy and, third, we will be looking at viral load because viral load really is a key end point in terms of what's the total viral load between both groups

Is the final data from the trial everyone is, obviously everyone is enrolled. How long will they be on the drug and as I said is this going to be the final set of data or is there going to be another round after this?

There is another round. Excellent question. This will be a data full month after enrollment into the trial, okay? There's another vaccination point that covers six months after enrollment to the trial so this is to prevent the out break of, second outbreak. Normally there are two out breaks of CMV. One occurs within the first six months and generally the second one occurs in the next six months. We have a six-month vaccination point so there will be follow up data occurring on the six-month vaccination to see how the same efficacy end points accrues then data should be available early next year

So we have, so everyone -- when you finished enrollment last fall, we are going to see data four months from that point, right? And then you'll have another vaccination at six-months. And we will wait how long after that to see an impact of that second vaccination?

We will have a three-month follow up. That's why I'm saying it will be about early 2010 when we get that data. If the data in the first four months looks good there's no reason that the data in the next six months is going to look bad

So we'll have some sort of intermediate type thing which is four months after the first and then we'll have another one which will be three months after the second one

Correct

Okay. And then, let's see, I had -- Jill, around financial guidance for '09, how should we look at expenses for the year? Is there going to be more of an impact on R&D, SG&A or manufacturing and production in 2009 in terms of reduction in cost?

We should see reductions across the board but if you just look at the clinical trials we had in place in '08, '07 and '08 versus in '09 we had the flu program going on in both of those years. So in '09 we will be focusing solely on Allovectin-7 and our CMV program so you will see a reduction and --

Remember in the CMV program we were in active clinical trial last year so there were clinical trials costs. This year is primarily data collection mode and data analysis mode, in terms of designing, proactively designing a Phase III study. Your manufacturing and production should come down as well? Correct, unless we do contract manufacturing and that's a revenue, cost neutral. If anything we make money on those activities

Jill, you mentioned you all were putting less emphasis on seeking contract manufacturing in '09 or were expecting less of that. Is that -- did I hear that right?

Not less than in prior years, the focus is on collaborative types of partnerships than in contract manufacturing.

The other thing is we are now approaching the end of Allovectin-7 trial. We are assuming that everything is going to work for Allovectin-7, and we feel pretty good about how the trial is going, and there's a huge amount of activity that needs to be going in manufacturing, particularly as it relates to validation, and for biological products they are a pretty intense activity and has lead times of almost a year so we are going to start undertaking some of those process validation, clearing validation activities to be prepared when we file our BLA.

That's good. Appreciate it

We will take our next question from Brian McCarthy with Noble Finance

Good morning.

Hi, Brian.

I was wondering if you had any better idea regarding when you might expect comments out of Sanofi regarding a peripheral artery disease Phase III and more specifically any thoughts regarding what they may be talking about at that point?

Normally they have analysts day call in the month of February but this year they have not scheduled it. We should hear an update from them in the second quarter of this year but from all their public statements they have told us they expect to complete enrollment by, they expect to file sometime next year, so we are hoping that the enrollment would completed by year end this year. So by second quarter, we should be able to report something from them, okay

Okay. Thank you very much.

We will go next to Eric Schmidt, with Cowen & Company

Good afternoon or good morning, Vijay. Just a question on the Allovectin pivotal study. Is there either a futility or efficacy interim analysis included in that protocol?

No, there is no futility. There is no analysis. If we do that we will take a statistical hit. We are just collecting data. Right now, there is an SMB, There is no DSMB here, which looks at safety. Remember it's a small trial, look at what the other people have done, other companies, they are doing 700, 800 patients studies. This is a 375 patient study. We have limited power in the study so absolutely there is no futility analysis, no interim look

It's very clear, thanks

At this time we have no further questions. I would like to turn the call back over to Mr. Samant for closing remarks

If there are no further questions I want to thank all of you for participating in this call and we look forward to seeing you soon. Thank you again

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