Brickell Biotech Inc (BBI) 2009 Q4 法說會逐字稿

Good day, everyone, and welcome to today's Vical, Inc. financial results conference. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open the conference up for questions and answers from 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.

Hello, everyone. Welcome to our year-end 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 year-end 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 our participants. In today's call, I will review and expand on our recent developments and provide our outlook for the remainder of the year. We will then open the call for questions. But before that, I will ask Jill Broadfoot, our CFO, to review the 2009 financial results. Jill?

Thank you, Vijay. In 2009, we generated higher revenues and reduced overall expenses compared with 2008 and we ended the year with sufficient cash to last at least through the next two years. 2009 revenues of $12.7 million included increased recognition of funding from our Japanese partner, AnGes, as we advanced in our Phase III Allovectin-7 trial. We also recognized revenues for the shipment to the U.S. Navy of a dengue vaccine we produced under a manufacturing contract.

On the expense side, we maintained the reduced levels of spending established after our restructuring in November of 2008. In 2009, we reduced total operating expenses by $4 million compared with 2008 as predicted at the time of the restructuring. Excluding financing, our net cash burn for 2009 was $22 million within our projected range and we ended the year with cash and investments of approximately $53 million. We raised $30 million of capital through two registered direct placements during 2009.

In addition, we issued $10 million of warrants of which $7.5 million have now been exercised. We are projecting a net cash burn for 2010 of $20 million to $24 million including anticipated receipts from new or expanded partnerships not currently contracted.

With that, I will now turn the call back to Vijay.

Thank you, Jill, and I will start today with our lead independent program for patients with metastatic melanoma, Allovectin-7. We announced completion of enrollment in our Phase III registration trial last month and we are really excited that our recruitment went so well. We are now focused on completing treatment and follow-up. And I would like to briefly review why we believe we are well positioned to win with this trial where others have failed.

We incorporated a number of success factors in the Phase III trial design through the ASP process. Those factors leveraged the lessons learned from our prior trials and trials conducted by others. So let me just list some of the factors that favors our Phase III success.

We have enrolled patients in this stage 3 -- patients with stage III/IV melanoma, recurrent melanoma patients who are chemo-naive and by definition chemo-naive patients live longer. We have recruited patients who have no brain mets or (inaudible) liver mets other than lung mets, and the most important thing that we have done, which everybody is now jumping on this bandwagon, is we are now using a normal LDH level in patients and all those LDH levels are measured by a central lab assay.

We believe that this healthier patient population has a better chance of surviving long enough since they are more likely to have healthier immune systems, providing a better chance for Allovectin-7 to work.

We designed our Phase III protocol to keep patients longer on the study. About two-thirds of our patients in our previous Phase II trials dropped out before finishing one cycle of treatment before Allovectin-7 had a chance to work due to strict resist criteria that categorized response or progression. Most responses in our Phase II trial occurred after at least two cycles of treatment.

Our Phase III protocol allowed by the FDA under SBA lets our investigators keep patients in the study through two full cycles of treatment under a modified resist criteria even if they develop new regional lesions, as long as those lesions are not clinically significant.

Our primary endpoint response rate at 24 weeks or more highlights the durable nature of immunotherapy response. All responses in the Phase II trial were active at 24 weeks or more. Historically in other trials, few dacarbazine or temozolomide [like] patients have had more -- have had active responses after 24 weeks.

In addition, all responses in our Phase II trial were durable. The median responsive duration of 13.8 months tells only a part of the story. The minimum duration of response was six months and the longest is now more than five years and still ongoing at the last checkup. The historical median duration response for dacarbazine in DMZ was three to for months and that is really lower than the lowest of our range.

So our -- just to kind of repeat what I said before, the minimum response (inaudible) was six months and the longest now is about five years. So it's an amazing set of data that we have from our Phase II study.

Our secondary endpoint of survival could be a compelling factor in the approval process. Overall median survival data from our Phase II study has been updated recently and is now almost 19 months for Allovectin-7 despite the high rate of early dropouts versus eight to 12 months for historical dacarbazine and temozolomide DMZ controls. Long-term stable disease patients may not have response rates but definitely helped survival.

In addition to these success factors, we believe the safety profile and convenience of outpatient administration make Allovectin-7 a very attractive option for patients. Remember the median age of patients in our Phase II trial was about 60 years.

We have completed three independent safety reviews interface three trials and there were no serious adverse events related to Allovectin-7 reported to date. Our protocol requires follow-up on all accessible patients until they reach either the confirmed response, disease progression, death, or at least one year with stable disease. Follow-up beyond the minimum could further highlight the anticipated advantages of Allovectin-7.

While survival is a secondary endpoint in our trial, a survival advantage could provide compelling support but (inaudible). We are excited by how this trial has progressed and we want to make sure we allow enough time for the data to mature.

Based on this information today, we would expect to log the clinical trial database around mid-2011. As we gain further insight by monitoring trial progress over the coming months, we will provide periodic updates and timelines. We believe Allovectin-7 is well positioned to become the first treatment for metastatic melanoma approved in nearly two decades.

Next I will provide an update on our CMB vaccine program. We are one of the few companies pursuing development of a vaccine for CMV and believe a successful execution would lead to a strong position in this field. In our Phase II trial, our TransVax therapeutic vaccine for transplant patients -- I am getting a sore throat. Hold on one second.

Our Phase II trial has completed follow-up and we are now collecting and auditing data for all patients. These data are extensive because they're very sick patients. Their significant medical histories and related complications can generate a lot of reports. We expect about 15,000 pages of case report (inaudible) for this trial and we need to make sure they're all complete and correct. That collection process is now going on and we will now follow the data analysis which we expect to complete by mid-2010.

The T cell immunity responses are particularly important in providing protection against CMV outbreaks in transplant patients. For that reason we formulated TransVax with a poloxamer intended to drive primarily T cell responses.

The second product in our CMV franchise is CyMVectin, our prophylactic vaccine intended to prevent infection in women before they become pregnant to protect against transmission of CMV to the fetus during pregnancy. CyMVectin is formulated with Vaxfectin to drive primarily an antibody response.

We have designed a Phase I trial of CyMVectin and I am pleased to announce the IND has been allowed by the FDA, clearing the path for us to move forward with this program. We are exploring the best way to advance, whether independently or with a corporate partner.

Thank you, Jill. I will try another chance. I really have a bad cold. Our pandemic influenza. I will now move to our pandemic influenza program and I will start with an obvious question. Why are we still working on pan flu after the H1N1 pandemic appears to be over.

We start with the promise that future pandemics are inevitable, okay? More outbreaks are expected. We believe it is not a question of if but when the next one will occur. It is also a question of which strain will cause the next one and how severe it will be. We are all very lucky that the H1N1 pan strain, which was relatively mild leading to fairly low numbers of hospitalization and deaths. The next one may be not as gentle.

Despite the moderate impact of the current pandemic, the H1N1 outbreaks definitely served as a wake-up call to the shortcomings of the established vaccine approach. The need for a faster, simpler, and less expensive approach to pan flu vaccines are now clearer than ever. For Vical, the H1N1 pan flu offers an opportunity to demonstrate the potential of our technology.

Funding for our Phase I trial is provided by the U.S. Navy and is supported by the Department of Defense Transformational Medical Technologies initiative. TMTI, which is a very important organization whose mission is to protect active US military personnel against emerging and genetically altered biological threats by discarding and developing medical countermeasures. This government-funded trial allows us to build on the success of our HIV-1 vaccine and generate more pan flu data to expand the safety and immunogenicity database in humans for DNA vaccines and our Vaxfectin adjuvant, to value the potential of our platform to provide up to 3 million doses of vaccine, and the amount needed for rapid protection of military personnel against future emerging disease threats, and to open the door to broader collaborations with the US government.

We are working with the Navy to advance this program. We have complete preparations for a Phase I trial including IND filing allowance. We expect the Navy to secure the additional funding needed to conduct the trial as soon as the snow blanket in Washington subsides, and we expect the trial to start soon.

Let me just touch on the collaborations. In a very development yesterday, our angiogenesis partner, Sanofi-Aventis, has finally chosen a marketing name for the product and I don't know whether I'm pronouncing it correctly. It is Temusi for its FGF-1 gene therapy and expects to present the data in the fourth quarter 2010 from its multinational pivotal Phase III trial for advanced PAD. Just a reminder, the Phase III trial is an exact replication of the Phase II study which was in 107 patients where they actually met all the endpoints. So assuming everything goes well, we should expect to receive positive data from this trial.

Our other partner, AnGes, entered into a special protocol assessment agreement with the FDA for a Phase III trial of its Collategene gene therapy for advanced PAD to be conducted in the United States and potentially other countries. AnGes is seeking a partner to help advance these efforts and is awaiting an approval decision in Japan, where they filed for approval in March of 2008.

Another piece of good information that happened in the last month, our animal health licensee, Merial, received full approval of its canine melanoma vaccine and launched a newly named ONCEPT in January. Dogs that will be -- that are successfully treated often suffer a relapse and subsequent survival is typically only a few months. ONCEPT dramatically improves survival numbers for dogs treated in clinical trials and its premium pricing should drive substantial revenues as the rollout progresses.

In conclusion, we have made terrific progress during 2009. We are expecting continued progress in our independent and partnered product development programs in 2010. We will continue to provide you updates on Allovectin-7 program as we advance towards trial completion. We expect to have final results from our TransVax CMV vaccine Phase II trial in mid-2010.

We expect to secure funding for our Phase I trial of our H1 pan flu vaccine and the trial should begin shortly. We ended the year with sufficient amount of cash. We had a cash burn only of $22 million in 2009 and we expect to manage this cash for at least two years as we advance most of our advanced programs.

This concludes our prepared comments. Operator, we are now ready to open the call to questions from invited participants.

(Operator Instructions) Alan Carr, Needham & Co.

Good afternoon, everyone. A question around the Sanofi program. It's moving along obviously Phase III data towards the end of the year. What sort of milestones can we expect to see around there? Are there milestone payments that come with completing the trial or NDA or BLA submission?

We haven't disclosed the magnitude of milestone payments, but I think we've collected about I guess $7 million to $10 million from them. Correct me if I'm wrong, Alan, since the original licensure.

As I've told people, the milestone payments are modest. They are not big milestone payments, however we stand to collect mid-single digit royalties, assuming worldwide commercialization of this program.

The reason I ask is that I'm trying to get a sense of the assumptions that you all are making with respect to your cash burn guidance this year, I'm wondering how much -- you mentioned its new or expanded partnerships or that may not be contracted yet. I'm just wondering how big the --?

No, so you need to look at the number of opportunities we have in the area of partnerships, right? We have opportunity to partner Allovectin-7 in Europe. We have told you that we've been working with Vaxfectin with a number of partners. We also have the opportunity to partner one or two of the CyMVectin CMV programs. So you know, there are a variety of opportunities. Plus they're always these animals health opportunities.

So we have a lot of irons in the fire right now. It's hard to predict which ones are going to accrue. That's the reason that the qualifying statement was in our press release today.

So your assumptions for revenue aren't -- there's nothing that is spectacularly different from the 2009 levels that we saw in terms of revenues.

No, as you have seen if you go back and look historical, our revenues have been in the last six, seven years in the $10 million to $15 million range (multiple speakers).

Okay, and then --

However, having said that, this year there is a larger emphasis on revenue from collaborations than in prior years. In prior years, there have been a larger emphasis on contract manufacturing, which has been a larger component.

Okay, and then with the Allovectin-7 program moving along, congratulations on finishing the enrollment. Can you go over the commercial strategy for that one?

I think the commercial strategy is pretty straightforward. I think we really want to partner it outside the United States, meaning primarily in Europe, because we really don't have a lot of European presence as it is required to be a good company that can file. We don't have a lot of regulatory expertise that we have conducted trial in [probably] most of the European countries.

In the United States, we would like to commercialize it on our own because we have spent a lot of effort developing it. We think it's an easy product to commercialize because nothing has been approved for melanoma for a very long period of time. But obviously, it all depends on what the commercial partner on the other side wants to do. So you know, we are open for a broad set of collaborations and a narrow set of collaborations.

As you know, we have already have a collaboration with Teva in Israel and with a company known as Eczacibasi in Turkey. So we have already started that effort.

Okay, great. Thanks very much.

Ren Benjamin, Rodman.

Good morning and thanks for taking the questions. I guess just going back to something Alan had mentioned regarding the burn, can you just tell me what the net burn for 2010 is then?

For 2010 or 2009?

For 2010, because you had mentioned $20 million to $24 million which encompasses the potential revenues from partners or potential partners. But what is the operating expenses, I guess, that you --?

I think your question is what -- the reason we have not given -- normally we give a burn and a loss because the loss is missing from this year's earnings statement simply because if the revenue comes in depending on how the revenue is structured, the treatment of the revenue and calculation of loss is different according to how the agreement is structured. That's why we have just given the burn rate. But the burn rate, net burn rate is the $22 million, $24 million is what we are saying.

Okay, okay, looking at Allovectin-7, maybe my timing was off but the enrollment appeared to complete on time. I thought that data would be available on 2010, but I thought on the call you mentioned that the database would be locked by mid-2011.

So the trial calls -- first of all, you can't lock the database because you have to -- the last patient has to cover at least six months before you can lock the database. That is the minimum. But the SPA calls for a minimum of 10 months of fall off, okay -- 12 months of fall off. So theoretically the trial can be completed at the end of 12 months, assuming all the patients are off the study.

But knowing how the study is going, we believe that patients are going to be beyond the 12-month point. That's why we are kind of predicting -- now if all the patients are done at the end of 12 months, the lock will happen sooner, okay? So it's hard to predict.

So it's all on event based and we want to lock the database so that we have both the response rate data and the survival data at the same time so they can be all captured when the database is locked. Fortunately for us, survival also will come in handy because the trial has started almost in, what, 2007, right? So it's almost three years. So we should be able to lock the database at the same time and both the response rate and the survival data matures. In survival data, as you know, you need to have at least 50% of events occur for the database to be meaningful.

So it's hard to predict at this stage, but as we go quarter by quarter, we will be able to give you better granularity in terms of how the trial is going and when we can be in a position to tell you what the exact date is.

Can you remind me, Vijay, if there are any more DSMB meetings and when the next one might be?

Remember, there is no -- there is -- it's an SMB. So there's no DSMB and yes there are going to be potentially one or two DSB meetings and they will be reviewing safety. But as I mentioned in my call, there will be three safety reviews so far. The safety profile is good. They have been not a single gray period or adverse events related to the drug.

And so the next one, is it more spread out now? It will be in six months, probably midyear or something along those lines?

I think it is another six months from now.

Got it. Okay. Regarding the CyMVectin trial, the IND has been allowed. What is -- it seems to me that you guys have the funding. You have the cash and wherewithal to move this program forward. What's it going to be a sort of moving forward? Is there enough interest right now that you want to pursue a partnership this early? Why not just start a clinical trial as soon as possible? What would that clinical trial look like?

Let me explain to you first of all, we are first of all very excited with the CyMVectin program simply because this is the last big target after Gardasil in HPV for adolescent females. This is -- it is a major cause of birth defects in females with CMV negative, so it's a huge market.

Having said that, the Phase I/II trial again will be small but the real efficacy trial, which would require CMV disease [in infants] is going to be a much larger trial where we need a partner. And that is why instead of trying to rush into doing this trial, we are looking very carefully to share our both CMV TransVax data as well as the fact that we are (inaudible) the IND to potential partners who can look at the immunogenicity data from the CMV TransVax trial and the fact that we are an IND in hand with a terrific trial design which I will cover in a minute, which gives us incentive for the other companies to say whether we want to fund the program. Because with big pharma, you want to make sure they are at the ground floor level when you start the trials so you don't end up repeating a whole bunch of activities.

So we are in discussions with everybody. We don't have sufficient amount of money to do all of what we are doing including taking TransVax to Phase III and completing the Allovectin-7 trial. So what we don't want to do is start a trial and leave it hanging out there without having the sufficient funds until we meet some critical milestones.

In terms of the trial design, our trial design is really a proof of concept study, so Phase I/II study. Our concept really is to go to a naval base where there is a day care center or some other particular place and do a study where kids are in the day care center who actually shed a lot of CMV and then inject both arms where the mothers are CMV-negative and see the infection rate. That's the concept of the trial design. It's a very unique trial design.

So then it's just fair to say that this program will not move forward without a partner? Is that --?

No, we have not said that. I think we want to be careful. We want to make sure we make an attempt to find a partner. Remember, we are going to get some very pivotal data coming on CMV TransVax in the middle of the year. That is going to lead to us spending a lot of effort on getting that program. We want to marry both these programs but keep them independent at the same time, marry them from a data integrity perspective because they are basically fundamentally the same pathogen that we're working on.

But I'm not ruling out the fact that we will do it without a partner.

Got it, thank you very much.

Craig Gordon, Cowen & Company.

Good afternoon. A couple questions. First on Allovectin-7, when you do lots of (inaudible) level, do you think you will also have survival data or is it more going to -- should we expect durable objective response rates solely the primary endpoint?

I think we -- our goal is when we lock the database, we will have both components locked in at the same time.

Okay, great. And on the --

Because remember, Craig, though we have an ASP and objective response rate which we think we have a terrific chance of meeting given our Phase II trial data, survival in the end trumps and we want to make sure we capture the survival data. So we don't lock the database once because once you lock the database, then that database subsequently is meaningless from an NDA perspective.

So whenever you are going to announce the data, you need to make sure both the attributes are locked at the same time.

Okay, great. And then in terms of H1N1, have you had discussions with the Navy yet pending the data from the Phase I whether -- how eager the Navy is to move into Phase II?

The answer is obviously the Navy -- remember the entity that I mentioned in the call, TMTI, which is the Transformational Technologies Group whose charter is to develop all these countermeasures and H1N1 is just part of their charter. There are a lot of other emerging pathogens they want to work on and this is really a trial case for us to demonstrate, hey, can we make a vaccine quickly using our technology platform? And a, we can develop immune responses which meet the standards that are prescribed by the FDA?

If that occurs, we could get funding for other pathogens as well as maybe for this Phase II trial. But right now, our goal is to get this money. We are almost there. Unfortunately with the flu blanket some of the paperwork has been held up, okay?

And I'm not sure -- I may have missed this, but I just want to make sure, AnGes, what is the status of their approval in Japan?

I think we are awaiting it as patiently as you are. The Japanese agency, as I've told people, is notoriously slow. We are going to find out hopefully in this quarter whether they are going to get approval or they are going to be asked to do something else, but I have no idea in terms of why it takes that long in Japan. Our partner remains optimistic.

And what is -- have you and AnGes talked about when AnGes plans on launching their Phase III in the US?

Their current plans are to do the study sometime this year. They are in active discussions with both US companies and Japanese companies to help fund that trial so that they can codevelop it with those companies. So those programs, those conversations are ongoing. But their intentions are to start this year.

Again as I mentioned, with our own dilemma with CMV IND, they want to get this Japanese approval in Japan behind them before they embark on a US trial.

Okay, great. Thank you very much and feel better.

(Operator Instructions) Stephen Willey, Thomas Weisel Partners.

Good morning, guys. Just wondering if you could maybe tell us when we get the TransVax data kind of mid-2010, will you have had any discussions with the FDA around what a pivotal trial might look like with respect to endpoints and anything like that?

Well, so the process there is very straightforward. First of all, you need to get the end of -- the Phase IIb data in hand. The database needs to be locked up, cleaned up, then you request a [Type C] meeting with the FDA to discuss the endpoints. And those -- so that will look good after that data is in hand and before we have the Type C meeting, we need to make sure the worldwide CMV experts are lined up behind us in terms of the endpoints that we are proposing will be acceptable to the FDA. Because really the guys who run -- who understand CMV most are the CMV clinicians who treat these patients.

So we are working on behind the scenes on getting that occur. Following that Type C meeting and once that endpoint is locked we will have an end of Phase II meeting where we present a Phase III trial design. And those are all planned. We haven't publicly disclosed those, but that will not occur before the data is disclosed.

So at this point are you really kind of looking at the outcome of that Type C meeting as kind of being the gating factor as to --? (multiple speakers)

No, I think we are pretty confident in terms of how that Type C meeting is going to go because we have been working with a lot of experts in this field. So the Type C meeting is a formality to kind of make sure.

You want to have a Type C meeting so you get one -- that way you get one audience with the FDA and then you again get the second audience with the formal audience with the FDA at the end of Phase II meeting. So those are two different opportunities to kind of reinforce the same points.

And then I know that AnGes portions of the Allovectin-7 funding has kind of come to an end here. And maybe, Jill, if you can just talk about how that impacts -- I guess, I know you gave us kind of a net cash burn number but maybe how that impacts kind of R&D in 2010. And then m more importantly in 2011 when you guys prepare to potentially file.

Well, for 2010, we built that into the forecasts. Their funding covers the Phase III trial and as that is now winding down in 2010 and we are in the data collection mode, we have less expenses from the outside trial expenses. So that is a reduction basically in our spending rate.

But however the data collection, the [CRAs], the outside database that we employed, getting ready for the endpoint adjudication, all of those expenses are reflected in this burn rate that we have given.

If there are no further questions at this time, I would like to turn the conference back over to Mr. Samant.

Thank you very much. We look forward to seeing you again in the next quarter's earnings call. This ends our call.

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