Brickell Biotech Inc (BBI) 2009 Q3 法說會逐字稿

Good day, and welcome ladies and gentlemen to the Vical, Incorporated financial results conference call.

(Operator Instructions) At the request of the Company, we will open the conference up for question and answers from invited participants after the presentation.

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

Thank you, Laura, and hello, everyone. Welcome to our third 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 third 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 to all the participants in today's call. I'll provide an update on recent progress, and our key development programs, and then we'll open the call up to questions. But before that, I'll ask Jill Broadfoot, our CFO to review our third quarter 2009 financial results. Jill?

Thank you Vijay. For the third quarter of 2009, we generated significantly higher revenues than in the same quarter last year, and we held the line on spending. We ended the quarter with our highest quarter end cash balance in over a year. Third quarter 2009 revenues of $3.9 million, included increased recognition of funding provided by our Japanese partner AnGes, reflecting the progress in our Phase III Allovectin-7 trial . During the quarter, we received the final $2.5 million payment from AnGes scheduled during the trial, bringing the total received to $22.6 million. We also recognized revenues in the third quarter for the shipment to the U.S. Navy of a Dengue DNA vaccine we produced under a manufacturing contract.

On the expense side, we have continued to operate at the reduced levels of R&D and G&A spending established after our restructuring last November. During the first nine months of 2009, our operating expenses are more than $3 million lower than the same period last year, and we remain on track to achieve the predicted $4 million of savings from the restructuring for the full-year. Excluding financings, our third quarter 2009 net cash burn was consistent with our prior projections for a full-year 2009 net cash burn of between $19 million to $23 million. As a reminder, we were recently rewarded a $1.25 million Navy contract for H1N1 influenza vaccine development. Our goal is to complete preparations for our H1N1 Phase I trial by year-end. If the payments for that work are not received by year-end, we could be at the higher end of our estimate.

We were pleased to raise additional capital in July with an at-market registered direct placement of $10 million of common stock with our largest investor. We ended the third quarter with $55 million in cash and marketable securities, up $6 million from the prior quarter, and up $13 million from year end 2008. With that, I will now turn the call back to Vijay.

Thank you, Jill. I'll start today with the H1N1 pan flu, which continues to capture the attention of governments, media and individuals over the world. This is the first pandemic in our 40 years, but probably will not be the last pandemic in the next 40 years. The growing size and (inaudible) of the world population, widespread international travel and a expansion of pathogen-friendly climates driven by global warming are all increasing the likelihood of more frequent pandemics. We've been lucky so far that the current pandemic has been relatively mild. While nobody knows how many people have been infected by the pan flu virus, the numbers documented hospitalizations and deaths have been low. Suppliers of conventional vaccines have responded to the current pandemic, but still have not been able to produce sufficient quantities to meet the initial demand. More than likely about half of the U.S. population will not get the H1N1 vaccine due to a variety of reasons, including timeliness and availability of the vaccine, and individual concerns about vaccine safety.

By the time the current pandemic ends, the government will likely have spent in excess of $2 billion, but too much vaccine and received most of it too late to be of any value. All of these issues highlight the need for a faster, simpler, and a less expensive approach to pan flu vaccines. That's where Vical comes in. Vical's goal for the current pandemic is straightforward and directly related to addressing this need. We have already demonstrated our ability to advance quickly through vaccine development and pre-clinical testing. We want to expand our human safety and immunogenicity database to better position DNA vaccines and our Vaxfectin adjuvant for serious consideration in future pandemics. And most importantly, we want to achieve the goal without risking shareholder values, where there's no assured commercial opportunity. We believe the Navy is an ideal partner for this effort. They have direct experience in working with our technology. They have the resources and facilities needed to conduct the clinical trial. They're funding our manufacturing, clinical and regulatory preparations for the Phase I trial. We expect the Navy to secure additional funding to conduct the trial. We look forward to starting this as soon as possible.

Allovectin-7. In our program for patients with metastatic melanoma, we are approaching completion of enrollment in our SPA designed Phase 3 registration trial. We are in the last lap. We have incorporated all of the lessons learned in our prior trials, and there was included in the design of the Phase 3 trial. We are enrolling, just to remind everybody, chemo naive subjects with no brain metastases other than lung, and with normal or better LDH, which is an important enzymatic marker. These patients are most likely to survive long enough to benefit from the slow, but what we believe are lasting, benefits of immunotherapy approach. Our Phase 3 trial is being funded by AnGes MG, our commercialization partner in Asia. And as Jill mentioned, AnGes made the final payment in support of this trial funding during this quarter, bringing the total investment to date of close to about $23 million.

In addition our partnership in Asia, we have sales and marketing agreements in place for Allovectin-7 with EIP in Turkey, and with Teva in Israel. We have obtained exclusive rights to market Allovectin-7 throughout the rest of the world. A third independent safety review will be completed on this trial in November. No significant safety issues were noted in the first two reviews. We expect to complete enrollment in the planned 375 patients by the end of 2009. If successful, Allovectin-7 could receive the first approval in nearly two decades of a new front-line therapy for metastatic melanoma. The factors that eventually determine our success includes our trial design, our ability to execute, the management focus and the diligent attention to detail.

Next I'll provide an update on our Phase 2 TransVax therapeutic CMV vaccine program. In the last call, we reviewed the encouraging results from our interim analysis of our four-month follow-up through the month of July. These interim results which are available in detail on our website favor TransVax vaccine versus placebo across all relevant clinical end-points and immunogenicity data. The scientific literature notes the importance of T-cell immune responses in providing protection against CMV outbreaks in transplant patients. In our four month analysis, we found notably high T-cell responses in the vaccine group, than in the placebo group against both of the CMV antigen encoded in our TransVax vaccine, which are pp65 and the glycoprotein. Recently we reported the immunogenicity results at the seventh analysis point, and the trend continues to favor the vaccine over placebo. Later this month, we'll complete the last follow-up visit for all patients still on study, and then we can begin to collect the final data. We look forward to reporting the final data in the first half of 2010.

Additional developments, just briefly, in our angiogenesis programs, we are awaiting approval of Collategene in Japan, based on the NDA filed in 2008 by our partner AnGes. The HGF gene therapy for advanced PAD has the potential to be the first product approved for use in humans based on our technology, and our Japanese partner is still very confident of its approval. Our second angiogenesis partner, Sanofi Aventis completed enrollment during the third quarter in its multi-national pivotal Phase 3 trial of its FGF-1 gene therapy for advance PAD. This is a 500 patient study. After the scheduled 12-month follow-up, Sanofi expects to file a BLA in the second half of 2010, assuming the data is good.

Our Vaxfectin adjuvant continue to generate data across a broad range of applications. As I've told you before, Vaxfectin can be an important value for the Company. During the third quarter, we presented encouraging results from animal studies of a peptide-based cancer vaccine formulated with Vaxfectin. Results from a mouse study demonstrated an 80-fold increase in antigen-specific CD8 T-Cell responses compared with unformulated vaccine. The cancer vaccine formulated with Vaxfectin also reduced the number of lesions in the lungs and provided significant survival advantage. Also during the third quarter, we issued a patent providing broad coverage for Vaxfectin formulated DNA vaccines against any circulating or potential influenza viruses, including both seasonal and pandemic strains.

We have two articles on Vaxfectin published recently in a special issue of the Journal Vaccine, one highlighted Vaxfectin's improvement of the performance of the Sanofi-Pasteur Fluzone seasonal influenza vaccine. The other provided some insights into the specific mechanisms by which Vaxfectin drives antibody and T-cell immune responses. Our progress during the third quarter sustained at an aggressive space across the breadth of our independent and partnering development programs. We have secured initial funding for our H1N1 influenza vaccine program, and we are looking forward toward initiation of the Phase I trial. We are approaching completion of enrollment in our Phase 3 trial for Allovectin-7 in patients with metastatic melanoma.

We'll soon complete the last follow-up in our TransVax CMV Phase 2 trial. That's a double-blinded study, and we'll have our final results will be in the first half of 2010. We also extended the breadth of applications and expanded the database for our Vaxfectin adjuvant. We ended the quarter with sufficient cash to continue development of our most advanced programs for at least the next two years at minimum. Our goal through the end of 2009 and going into 2010 is to advance the programs towards completion as quickly as possible, while maintaining a diligent focus on operational quality and data integrity. This concludes my prepared comment. Operator we're now ready to open the call to prepared questions from my invited participants. Thank you.

Thank you Mr. Samant.

(Operator Instructions)

And our first question comes from Steven Willey with Thomas Weisel Partners.

Hi. Thanks for taking my questions, and congratulations on another good quarter. I was just wondering, in thinking about the TransVax program, I know that you've guided to an end of Phase 2 meeting with the FDA. And there's obviously uncertainty around some of the primary end-point in CMV disease, and just kind of wondering how you're thinking about a partnership, and do you intend to have a partnership in place before you go into that meeting with the FDA?

I think, before talking about partnerships, the important point that you raised is the primary end-point. Okay. I think most of the clinicians were operating in the space, recognized that the viral load end-point is probably the most important end-point. As a result, we are working with some leading experts to put a position paper to convince the FDA that that's the right end-point, okay? Because CMV disease, incidence is very low, because of the treatment of antivirals, is an unrealistic end-point. And I think our goal is to have such a position paper created in the 2010 time period. We are in discussions with partners, as I said before. But this is a program, given its size and nature, is a program that can easily be managed by us, unlike the prophylactic vaccine, which is really a program we are definitely going to need partnering beyond the Phase 1/2 study. So the answer is, yes, but the other program has a broader importance in partnership.

Okay. So presumably a partnership that would want to be involved, I guess, in what those discussions are, around the basis of what's going to serve as a primary end-point, but it's not a pre-requisite.

No, I think the most important thing, is the partnership discussions are based not so much on end-point, because most of the partners who understand the CMV disease realize that viral load end-points are very important points. I think people are going to wait for the full data. Remember we're going to have data after four injections, where the second (inaudible) occurs after 6 months. And that going be very critical data, in terms of the important end-point of antiviral usage, the viral loads, the standard end-point that we have on the website and how do they hold up. Was the four months just a fluke in the data, or is this a consistent thing we're seeing through the entire 12-month follow-up? And the good sign for that, that is we just showed the 7-month immunogenicity data, and that immunogenicity data is actually very much the same thing that we saw in a form of data points. That holds kind of up on the viral load end-points. We don't expect to see any data different than what we saw earlier, which will be very fortunate in terms of our partnership discussions.

And I know there was some talk when you presented the in-turn TransVax data about potentially looking at an earlier or even a more frequent boost. Is that something that you guys are ready to address, or is that something that will probably be discussed once we see the finalized data?

Yes. I think we have the ability to do that. Your question to clarify for the rest of the audience, should we accelerate the injections, so we get a couple more injections before the first hundred days as opposed to the currently schedule? The answer to that question is, we have a lot of flexibility there, because as you'll remember, when we did the prior Phase I studies, we had done a study on this schedule. Plus we had done a study on [accelerated] schedules. So we have safety data on both the schedules.

Okay. And then just one more question quickly if I may. Does it have Collategene have orphan drug designation in Japan?

I don't know. Excellent question. We'll follow up and get back to you.

Okay.

I don't know whether the concept of our product status exists in Japan. But I will get back to you.

Wonderful. Thanks a lot.

Thank you.

Our next question comes from Eric Schmidt with Cowen and Company.

Good morning, Vijay. Just kind of looking for some insights into the timing of Phase 1 study for the H1N1 flu vaccine. You got the funding now from the Navy. How soon can you pull the trigger and start up that study and when might we see results?

I think you'll see the results in the first quarter. Unfortunately we are now approaching the holidays, and more so we don't know how hard it is to recruit patients, because people are getting vaccinated with H1N1, and people are getting the flu. We don't know what our screening effort is going to be for the 30 patients we are going to do. Are we going to need 300 patients to be screened, or is it just going to be 30 patients like we screened in H1N1. That's why I'm kind of -- by the end of first quarter, no later than end of first quarter, we should have data. So, that will be the farthest it can go. Hopefully much sooner than that.

And does the contract have any provisions in it for what might happen after you get the data, should you see some level of immunogenicity? Is there a plan moving forward or do those all have to be negotiated at the time?

Those all have to be negotiated. But having said that, we are having on going discussions with the Navy in terms of the funding agencies that, getting them familiar with the vaccines manufacturing capabilities, our able to conduct clinical trials. So that ongoing dialogue and confidence building is going on and will continue. So as the data comes out, we're not caught flat-footed and the Navy does has the ability to fund such programs.

Thanks a lot.

(Operator Instructions)

We'll take our next question from Alan Carr with Needham & Company.

Hi, Alan.

One of my questions, there's a little bit of an up tick there in the manufacturing spend. Is that related to the Dengue vaccine for the Navy, or why is that up in the third quarter?

Jill, you want to answer that?

Yes. That's definitely related to the shipment of the Dengue vaccine.

Okay. The other question, you talked about Vaxfectin during your prepared remarks. I wonder if you can go over the strategy. What is the opportunity for Vical?

Well, the opportunity is all data driven. The opportunity cannot be created until we have data. One of the key things we're doing is working with a number of people in terms of giving them access to Vaxfectin, and letting them use it in their own animal models to see whether Vaxfectin, can do better than their best mousetrap that they're using. If these companies get the data, which is better than what they're using the best data, then obviously Vaxfectin is going to create an opportunity to use companies in both the cancer space and the vaccine space. We'll have more data come out in 2010, which we have not publicly disclosed as we're working with companies. Some data may not come out which may lead to partnership. If the data is not good, you may not hear about it.

Do you anticipate an exclusive deal around this one, or several non-exclusive deals?

It all depends on the about antigen and the vaccine, the disease targets. Some companies, based on the certain disease targets may want to get an exclusive position. If companies have a lot intellectual property surrounding their antigen there's no reason to get an exclusive, because their intellectual property trumps Vaxfectin's intellectual property. So they'll go for a non-exclusive license.

Okay. That's all for now. Thanks.

Thanks, Alan.

And there are no further questions at this time. I will now turn the call back over to Mr. Samant.

Thank you, everybody for participating in this call. We look forward to seeing you at the next quarter. Thank you again.

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