Brickell Biotech Inc (BBI) 2009 Q2 法說會逐字稿

Good day and welcome, ladies and gentlemen, to the Vical Incorporated financial results conference call. At this time I would like to inform you that this conference is being recorded and that all participants are in listen-only mode. At the request of the Company, we will open the conference up for questions and answers from invited participants after the presentation.

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

Hello, everyone. Welcome to our second-quarter 2009 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, 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 second-quarter 2009 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. In today's call I will provide an update on recent progress in our key independent and partnered development programs and our outlook for the remainder of 2009. We will then open the call up to questions. But before I do that, I'll ask Jill Broadfoot, our CFO, to review our second-quarter 2009 financial results. Jill?

Thank you, Vijay. Following our strategic restructuring in the fourth quarter last year, we have maintained a sharp focus on our key development activities, the Allovectin-7 and the TransVax CMV vaccine program.

Our financial results for the second quarter of 2009 reflected higher revenues and lower expenses than in the same quarter last year, and we ended the first half of 2009 with a higher cash balance than we had at year-end 2008.

Second-quarter 2009 revenues of $4 million included continued funding by our Japanese partner, AnGes, of our Phase 3 Allovectin-7 trial. We received a $2.5 million progress payment from AnGes during the second quarter. We also received a $1.5 million milestone payment from Merck during the second quarter in connection with our hTERT cancer vaccine program.

Our focus on key programs allowed us to also reduce operating expenses by $1.6 million compared with the second quarter last year, from $11.4 million down to $9.8 million. We also achieved a $2.5 million reduction in net loss for the same periods, from $8.5 million down to $6 million, which is consistent with our guidance for the full year.

We were pleased to raise additional capital in these very challenging economic times. During the second quarter of 2009, we completed an at-market registered direct placement of $20 million of securities with institutional investors. In July, we concluded another at-market registered direct placement of $10 million of common stock, which further strengthens our financial position.

We ended the second quarter with $49 million in cash and marketable securities. Or second-quarter 2009 net cash burn was consistent with our prior projection for a full-year 2009 net cash burn of between $19 million and $23 million.

I will now turn the call back to Vijay.

Thank you, Jill. In the recent months there has been a substantial interest in our swine flu vaccine, fueled by the concerned about the availability of vaccine to protect against the continued global spread of this pandemic virus. Investors have rallied around Vical, as they have with other companies focused on this serious threat.

What sets Vical apart from most others is the fact we have already demonstrated our ability to move quickly through the vaccine development and production processes. We showed that in H5 previously.

Within a week of the initial reports of widespread outbreaks in Mexico, we were the first company to enter into an agreement with the US government for the development and testing of a vaccine against H1N1 influenza. Within two months of securing the gene sequence of the H1N1 pandemic strain, we were the first company to report results of immunogenicity testing in animals. Our vaccine elicited robust immune responses well above the accepted protection threshold in 100% of the vaccinated mice and rabbits after a standard two-dose regimen.

Our H1 vaccine proved to be very immunogenic, and our geometric mean titer -- which is really a measure of how immunogenic the vaccine is -- was 1522 in rabbits and 987 in mice after two doses. Let me repeat. 1522 in rabbits and 987 in mice after two doses.

Just put these numbers in perspective. The seasonal influenza vaccine produced a GMT of 92 versus the 1522 that we got in rabbits. And the live H1 virus challenge of ferrets by the CD produced a titer of 1280 versus 1522 we got in the rabbits. So our vaccine generated immune responses in the same range as a live challenge. This is an excellent achievement.

We believe these impressive results warrant further development, and the Navy is an ideal partner for this effort. They have direct experience working with us on dengue vaccines and are therefore very familiar with our technology. They have the ability to recruit healthy volunteers very quickly for a clinical trial and have access to facilities where such a trial can be conducted rapidly.

We are actively working with Navy under our existing CRADA to advance into human clinical testing. At the same time we are exploring opportunities to work with foreign governments to pursue development of H1 vaccines in areas that may be underserved by the current conventional vaccine manufacturers.

Our lead independent product development program is our Phase 3 registration trial for Allovectin-7 in patients with advanced metastatic melanoma. This trial is being funded by AnGes MG, our commercialization partner in Asia. AnGes has already made two progress payments to Vical this year, bringing their financial support to this program so far for more than $20 million.

Last fall we announced an exclusive sales and marketing agreement with our Turkish partner, EIP, for the distribution of Allovectin-7 in Turkey. This week we announced that we have entered into an exclusive agreement with sales and marketing subsidiary of Teva Pharmaceuticals for distribution of Allovectin-7 in Israel.

We are actively enrolling patients at more than 90 sites worldwide, including our newest sites in Brazil. We expect to complete enrollment of the planned 375 patients in our pivotal Phase 3 trial by the end of this year.

Next, I will review the progress on our ongoing Phase 2 TransVax therapeutic CMV vaccine program. Our Phase 2 TransVax trial is a one-to-one randomized double-blind placebo-controlled multicenter study in 80 HCT patients.

The CMV seropositive transplant recipients enrolled in our study are at high risk for CMV reactivation. The use of immunosuppressive drugs to prevent transplant rejection in these patients allows their existing but latent CMV infection to reactivate, complicating their recovery. Our TransVax therapeutic vaccine is intended to help control CMV during this period and reduce the need for toxic and expensive antiviral drugs.

We designed our Phase 2 TransVax trial primarily as an endpoint defining strategy study to determine which of the multiple endpoints may be the most meaningful as a basis for a pivotal Phase 3 study. We completed enrollment of the study last November and reported promising interim efficacy results in July.

As a reminder, our protocol includes four injections of the transplant recipients. One dose several days before the transplant procedure and three additional doses at two months, three months, and six months after the transplant. Our interim analysis includes data collected through four-month follow-up visit for each patient before they receive their final six-month vaccination.

We have posted the results of this interim analysis to our website, so I'll not review them in detail today. But feel free to look at them and call Alan if you have any questions. But will provide a brief summary of our findings.

The primary efficacy data were based on serum levels of CMV through PCR analysis conducted at one central lab at the Mayo Clinic, not at the local hospital labs. We went on the Mayo results.

The viral load data favored TransVax vaccine group over placebo across five key measurement points. One, occurrence of CMV infection, which indicated a viral load at or above the minimum detectable level at the central lab. Two, recurrence of CMV infection, which indicated at least two episodes of CMV reactivation.

Three, duration of CMV infection, measured as the number of days with detectable viral load as a percentage of total days on study. Four, the area under a curve, which is measured as the cumulative total amount of detectable CMV virus over a four-month study period. And finally five, the median peak viral load, which reflected the highest level of detectable CMV virus during the study period.

We have also analyzed the use of antiviral drugs against TransVax. Vaccine groups outperformed the placebo group on three key measurements -- the percent of subjects requiring initial courses of antiviral treatment; the percentage of subjects requiring additional courses of antiviral treatment; and the total duration of antiviral treatment.

In addition, we completed immunogenicity data between the two groups through the four-month follow-up period. For transplant patients, the scientific literature notes the importance of T-cell immune responses in providing protection against CMV outbreaks. We found that T-cell responses against both of the CMV antigens encoded by our TransVax vaccine were markedly higher in the vaccine group than in the placebo group.

In summary, we are highly encouraged by these interim results which appear to favor TransVax vaccine versus placebo across all relevant clinical endpoints and the immunogenicity data. Although our Phase 2 protocol does not allow us to report statistical analysis or P-values of this interim data, we look forward to presenting a full statistical analysis when we report the final data in the first half of 2010.

I'll remind you that this Phase 2 trial was first and foremost and endpoint defining study to help us, with the assistance of CMV and transplant experts, to design a pivotal Phase 3 trial acceptable to the FDA.

Let me move on to some of the additional developments. I don't know; some of you may have forgotten, but the NIH recently started a Phase 2B study of a prime-boost vaccine regimen for HIV using three doses of DNA vaccine which were manufactured by Vical I think in what, 2007, Alan? Followed by single dose of adenoviral vector vaccine. The placebo-controlled study will enroll 1,350 HIV seronegative men who have sex with men, putting them at high risk of HIV infection.

The trial recently opened for enrollment and is recruiting in multiple sites across the country. The trial will evaluate the ability of the prime-boost vaccine regimen to reduce HIV infection and disease.

In our herpes simplex virus program which is funded by a grant by the NIH, we published preclinical data in the Journal of Virology which identified potential targets for development of a vaccine. We are pursuing development of this vaccine which will be evaluated with a novel Vaxfectin adjuvant in collaboration with leading experts at the University of Washington.

On the intellectual property front, we were recently issued a US patent covering the use of influenza virus gene sequencers for a universal vaccine that could provide protection against circulating seasonal strains as well as emerging pandemic strains of influenza viruses. This patent adds to our existing portfolio, which provides broad protection in the field of DNA vaccines.

Finally, we expanded the potential uses of our patent estate through a nonexclusive academic license to Johns Hopkins Bloomberg School of Public Health. We had previously granted academic license on the same terms to 10 other leading institutions including Stanford, Harvard, MIT, and others.

In summary, we have made tremendous progress in both advancing our product development programs and in validating our platform technology through a series of significant accomplishments. The first approvals of products for animal health applications based on our technology have established commercial as well as technical validation. Our angiogenesis partners have demonstrated success in advanced human clinical trials. And AnGes, our Japanese partner, is awaiting what could be the first approval of a human product application of this technology.

We're on track towards completion of enrollment in our Phase 3 trial of Allovectin-7 in patients with metastatic melanoma. If successful, this trial could lead to the first approval in nearly two decades of a new front-line therapy for this deadly disease.

Our TransVax CMV vaccine Phase 2 interim results have demonstrated that DNA vaccines have the potential to elicit meaningful T-cell immune responses even in seriously immunocompromised patient population which is beyond the scope of conventional vaccines.

Last year, we successfully demonstrated that DNA vaccines can elicit robust antibody responses with the completion of our Phase 1 trial of our H5 pandemic influenza vaccine. The trial also demonstrated the safety and tolerability of our adjuvant Vaxfectin, which is being explored in multiple additional applications.

We demonstrated both the speed and the strength of our approach by being first to announce the excellent preclinical immunogenicity results for our H1 vaccine, and we are working with the Navy to keep that program moving forward.

The $30 million we raised over the past few months provides us with sufficient cash to continue development of our most advanced programs. With a broadly applicable platform technology, with a plate list of collaborative partners, and a focused portfolio of novel product candidates, Vical is clearly hitting the stride.

That concludes my prepared comments. Operator, we're now ready to open the call for questions from invited participants. Thank you.

(Operator Instructions) Stephen Willey, Thomas Weisel Partners.

Thanks for taking my question. I was just wondering if you could maybe just elaborate a little bit on where you are with the Navy right now with respect to working on the H1N1. Do you anticipate some kind of public announcement of I guess hard funding coming in for this program?

All I can tell you at this stage is that we are in active discussions with them, so this is not just a conference call rhetoric that I am putting forward to you. I think maybe as any government organization has to go through a lot of bureaucratic procedures, but we are in active touch with them, and we feel pretty confident that we will get the funding.

Then maybe just kind of an aside to that as well. There's obviously been kind of a lot of press with respect to the poor yields that some of the larger pharmas are getting on their H1 candidates.

Has there been any kind of acceleration with respect to Vaxfectin? Potential interest, potential partnerships?

We normally don't comment on who we are working with. But all I can tell you is yes, we are actively involved with a number of people, including people in the field of flu business who are evaluating Vaxfectin. The end of these partnerships take time to develop. They are done on the basis not of our own data, but the partner or the collaborator getting data. And it's in their own laboratories with their own constructs, so it takes time.

The answer is yes, this is done because Vaxfectin is an excellent adjuvant, and it's done not in the context of the H1N1 swine flu vaccine, but there may be certainly applications there. Okay?

Just to follow up on your question about this low yield that we are hearing, and we are hearing the same thing. You need to understand that we are not impacted by that low-yield productivity issues that the conventional vaccine manufacturers have, because we make our vaccine by fermentation. We don't handle the pathogen itself.

So if anything, we believe based on our preclinical studies that the H1N1 probably is more immunogenic than the H5N1 vaccine that was previously made. Remember, the H5N1, the conventional vaccine manufacturers were using 90 micrograms times 2. So they were using two doses, 19 micrograms times 2, versus the normal flu vaccine which is 15 microgram dose. Okay?

So it remains to be seen how the conventional vaccines are immunogenic. So I know people have just started some of their clinical trials. They are just about to start the clinical trials, and the data is not going to be available for at least the next three to six months.

So at that time, we'll either be past the flu season, or ready for the next flu season.

Great. Congrats on a good quarter and I'll jump back in the queue.

Craig Gordon of Cowen and Company.

Hello. Congratulations. Just a couple follow-up questions. First, in terms of the H5, where does that development program stand?

Well, you know, the H5N1 program, we completed a Phase 1 study in humans. That was a 100-patient study. And you know, our data across the three different dose levels were somewhere between 50% and 67%.

And really with rigorous assays, okay? These were not cockamamie assays that we developed here. These were not functional assays. These were CDC prescribed assays. We actually had some of the serological samples tested by an independent lab.

The reason I'm telling you is a lot of people are representing they got 60% responses or 50% response. It's meaningless.

The first question you should ask is, did you use the CDC prescribed assay? Are you using the four-fold increase from baseline in counting your seroconversion? We did that.

And we are waiting for funding either through the US government or some other foreign governments to move the program. I'm a firm believer that this H1N1 is just an hors d'oeuvres, an appetizer. The real pandemic is going to be H5.

Remember the fact that H5 is not in the scene doesn't mean that there is no activity going on in the hotspots around the world in H5. H5 has still a pretty active potential to become a pandemic, okay?

So we are pretty well prepared. We have an IND in place; we've completed a Phase 1 study. We need money to expand the study and repeat that in a larger number of patients to (inaudible) the study.

And our discussions, by the way, outside the United States are primarily on the H5.

Do you see something -- do you see this progressing? Is that a 2009 event? Or do you think that could be more of a 2010 event?

No, no. I mean, if -- you don't know but at the end of this conference call, you may hear that there is an H5N1 outbreak. This is a pretty dynamic situation, so it's hard to predict what the timing of that is going to be.

But I think we're in a great shape with H5N1 and we're getting in a better shape with H1N1, because we got most of the work done on H1N1 from a preclinical perspective.

Great. Two other questions if I may. On the AnGes, last we had heard they might be considering taking the Collategene into a Phase 3 program in the US. Is that still on the table? Have you gotten any updates in terms of their intentions for that program?

The answer to that question is yes. They are in active discussions with the FDA on a design of Phase 3 study and hopefully they are successful. Once they are successful and they come with that announcement, that will be the point to move. But we expect that to occur sometime this year.

Great. Then on the Sanofi, since the trial will be completing, do you anticipate data in Q1? Or is that more of a Q2 2010 event?

We do not have a specific date from them, but our expectation is going to be the first half. So if they -- if you go to their website and what they publicly stated, that they are going to file in the second half of next year, and if that's going to occur, my guess is with a six-month follow-up the data should be available early next year.

But we have not heard when they are formally going to release or what conference they're going to release this data at.

Great. Congratulations on your progress again.

Alan Carr, Needham & Company.

Hi, good morning, everyone. I wanted to -- one follow-up question on the flu program. Is there any particular extra data that these potential funding agencies are looking for? Is it just a matter of -- trying to get a sense of what the challenge is in terms of getting some funding for this program.

Well, the data that we wanted to show to our funding partner is the Navy, who is negotiating on our behalf. Remember, we are not directly negotiating with the government to secure funding. The Navy is our surrogate partner who has seen the data. They are happy with the data. They're working with us on dengue, so they are the ones who are negotiating with the appropriate government authorities to get funding for this program.

And remember, Navy has a special access to the funds because Navy does a lot of vaccines research. Okay? The Naval Medical Research Center.

Okay. Thank you. Then around the melanoma trial, do you have any access to data from that trial ongoing that you can share with us? Or is this essentially going to be a black box until we see results next year?

First of all, I'm absolutely impressed, Alan Carr, that you're asking what Allovectin-7 (multiple speakers). So this is a turning point; I've got you convinced now.

Remember, nothing has been approved for melanoma for a very long period of time. There are a lot of skeletons on the melanoma highway. I think we are pretty excited because the trial is recruiting well. I think I visited almost a dozen centers, as I've told, in the last six months. And I feel that the nurse coordinators and the doctors are pleased with the progress of the trial.

There is no interim analysis of the trial, to answer your question. It's going to be -- the P-values are going to come out once the trial is closed out and all the data is collected and we have gone through all of -- I mean the database is locked. Okay?

Remember there is no DSMB. There is only a safety board that looks at safety perspective.

And remember the trial is not a double-blinded study. It's not blinded to the physicians; it's blinded to us. Because one is an intratumoral therapy, which is the treatment arm; and the control arm is an intravenous and an oral therapy, depending on whether you get dacarbazine or temozolomide. So the answer is no, we have no interim analysis.

Anything in the blinded data of interest that you can share with us?

No, we're not snooping around in the data. I mean the fact that the trial is going well and the fact that the physicians who are not blinded to the study are recruiting patients -- that tells us that they are happy with the study.

Okay.

Remember, most of the studies which are double-blinded, the recruitment rates are meaningless. Okay? Here the docs know in their own hospitals this thing is working for them and us.

Okay. Then one last one if I may, around the CMV program. Any update on partnering strategy around that program?

We are in active discussions with a variety of companies. Some of them are in the process of reviewing the data; some of them have looked at the data. So I can't comment on where it stands.

But there is a lot of interest in the data because universally most of the CMV experts who have looked at the data -- and we have reached out to most of them, because we are friends with most of them -- feel that the data is great.

To quote one of the CMV investigators from the UK, his comment was, Vijay, if this data was seen in HIV patients -- who have basically the same kind of immune status -- you would be on the front page of the New York Times.

Unfortunately people don't understand CMV, so I hope you guys write about it.

Do you plan to partner this before starting Phase 3? Or are you all still entertaining the possibility of doing a Phase 3 program yourself for this particular indication?

Well, I think as we said always that the real opportunity for partnering is really CyMVectin, which is our program for females of childbearing age. I think that is a great opportunity, a huge opportunity.

This is a program that we can manage on our own. However, if we find a partner who is willing to fund it, we are open to the idea. But I think that's clearly the focus of the partnership.

I see. All right, well thank you very much.

(Operator Instructions) Ren Benjamin, Rodman.

Hi, good afternoon and thanks for taking the questions. I guess most of mine have been answered. But just to dig in a little bit more, maybe starting off with the H1N1 program, are there any more studies that are ongoing, preclinical studies, maybe a challenge study, or any other data that we might get? Or is the next milestone really the funding from the Navy?

The next milestone is funding. We are not going to tell you that we made the material and things like that. It's all meaningless, okay? The fact that we made material, we have made this material several times. We have the cell banks, we have made the prototype.

The next milestone is funding. Everything is irrelevant after that. Okay? We have got to get the funding to get into the humans; that is really the key milestone.

Just to understand the next trial, once the funding is obtained, how big is the next study and when do you see results coming?

I think it's big right now. You know, we're in discussions with the Navy in terms of what dose ranging if any we need to do, what size we do, what age group of patients do we go into.

I think a little bit of that trial design is a little bit dynamic because of what people on the conventional side are doing and what hurdles they are facing.

I think we're in a much better shape. Because some of these people have gotten out of the [pond] and running, and they are going to run and trip and fall. And we want to make sure that we learn from what their losses are quickly.

So the study design is dynamic. Having said that, it is not going to be a huge study. We want to quickly demonstrate that this vaccine is immunogenic -- if anything, more immunogenic than our prior H5 data, and much better. And if hopefully we can even show that it has some better cross-protecting, has a much broader neutralizing capability than conventional vaccine, if we show that in small number patients we have hit a home run.

Okay, and then just regarding the government and sort of the chatter there. Since you are in constant contact with the Navy and have an idea as to what's happening, do you have a good sense as to what the chatter? Any sort of thoughts that are coming out from the Navy regarding stockpiling or moving forward into the fall, as far as the government is concerned?

It's all -- nobody knows. The school of thought is that this may kind of go away. But I don't know whether you're keeping an eye; I get the SOSes from the World Health Organization and others. Today North of Bombay in Mumbai, in the city of Puna, there was a riot where thousands of people are lining up in the hospital to get their H1N1 status tested. People who are sick with flu because a couple of young children have died in that city and there is a panic in the city.

So is this a lot of media hype and people panicking? Or this pandemic is for real? We don't know.

So to answer your question, the intensity, how the money flows towards this program, is directly proportional to what we are serious to [solve]; what death and morbidity is with this particular studies. Right now everything seems to be under reasonable control, at least in the Northern Hemisphere.

Got it. Just moving on to the CMV, the TransVax program, what are the current thoughts regarding prevention? Is the IND still on schedule? And did you learn anything from this interim analysis that has made you change your thoughts regarding the prevention indication?

No, I think if anything it has reinforced that, A, this vaccine is immunogenic. It does directly impact the amount of virus that circulates in the body even there is a re-activation.

We now need to work with the experts and particularly some of the CMV experts and the transplant experts to come with two or three primary endpoints and maybe a composite endpoint; and then present a white paper to the FDA; have a Type 2C meeting with them before we have the end of Phase 2 meeting which will occur earlier next year; and then go from there.

I think, no, t he thought process has not changed at all. But we can't have an end of Phase 2 meeting till the final fourth-injection data is in our hands. Okay?

So that is for the prevention protocol as well?

It is. Oh, you're talking about the CyMVectin?

Yes.

Nothing has changed. I think -- remember that vaccine is formulated with Vaxfectin and encodes only GB. So it antibody-mediated response.

I think we have good -- there is a paper that Bob [Fass] recently published in the New England Journal of Medicine using GB protein. So it tells you that GB indeed does have an impact on prevention. So that has given us a good frame of reference in terms of how our vaccine is going to be effective. I'll send you the article, okay?

Okay. Just one final question. Milestones for the remainder of the year that as investors we should be looking out for; and just any thoughts on -- I think it was Merial that just got acquired by some other pharma?

No, it was a 50-50 joint venture between Merck and Sanofi, and it's a part of the Sanofi Merck Schering-Plough merger. Merck having some animal health, Schering-Plough having some animal health business. I think to prevent any intervention by FTC, they kind of sold their share of that animal health business to prevent any antitrust issues to Sanofi Pasteur. So Sanofi, which was a 50-50 owner, is now 100% owner of Merial. Okay?

Okay.

It was not required by any other company. To answer your question, we expect that in the next few months they will -- we have not heard recently in the last one month or so, but Merial or that animal health company is very optimistic of that drug getting full approval. If that gets full approval you'll see ads in your local TV channel advertising, that product being advertised. As we told you it's going to be priced at $1,000 per therapy.

In terms of your question on what terms the immediate milestone payment, the milestones that are going to come, we expect the completion of the enrollment of the Allovectin-7 trial. The follow-up will be collecting data after the fourth injection of the CMV TransVax vaccine. And we should have data in the first half of 2010, which will be complete data after four injections.

That will be really the data that we take to the FDA in finalizing the design of Phase 3 study. That doesn't mean we are going to wait for that data. We will be working on the design of Phase 3 in advance of that.

We expect our approval of our AnGes license sometime by the end of this year. That is what our Japanese partner is telling us. This is which is for Collatagene, which is for angiogenesis.

As somebody had asked before, that Sanofi data should be available sometime in the first half of year. We hope it's available in the first quarter of next year.

The Merial vaccine we think we should get data. Potentially pandemic flu funding either for H5N1 or H1N1. Hopefully some more technical data on Vaxfectin with some other constructs that we have been working on with our collaborators. So quite a lot of news flow.

Terrific, guys. Thank you very much and congratulations.

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

Well, this concludes our session today. I thank you all for participating. We look forward to seeing you in the near future. Thank you.

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