Brickell Biotech Inc (BBI) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for your patience and welcome to the Vical Inc. 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 a listen-only mode. At the request of the company, we will open the conference for questions and answers from invited participants after the presentation. I will now turn the conference over to Mr. Alan Engbring, Executive Director, Investor Relations. Please go ahead, sir.

Thank you. Sorry everyone for the technical difficulties.We had a problem getting into the call. Welcome to our third quarter 2012 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 independent and collaborative research and clinical development programs, that are subject torisks 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 with the Securities and Exchange Commission, as well as the specific risks and uncertainties noted in Vical's news release on third quarter 2012 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.Sorry for this technical difficulty we had this morning.We have some very important information to share with you.On today's call I will read the status of each of our independent development programs as well as partnered programs.Before I do that, I'm going to have Jill Broadfoot give you update on our latest financial results. Jill?

Thank you, Vijay. Our third quarter 2012 financial results reflect a continued program advancement and sustained financial strength.Revenues were $2.2 million for the third quarter of 2012, compared with $26.6 million for the third quarter of 2011. The decrease in revenues was primarily driven by the $25 million upfront payment Astellas from last year for the TransVax license, partially offset by reimbursement from Astellas for extensions this year in support of TransVax.

Our net loss for the third quarter of 2012 was $7.7 million compared with a net income of $16.4 million for the third quarter of 2011.

Revenues for the first nine months of 2012 were $15.2 million compared with $28.1 million for the first nine months of 2011. This decline in revenues again primarily reflected the impact of the upfront payment under the TransVax license agreement last year and was partially offset by a $10 million milestone payment received in 2012 and the ongoing reimbursements for expenses this year under the license agreement.

Net loss for the first nine months of 2012 was $15.4 million compared with a net loss of $700,000 for the first nine months of 2011.

At September 30, 2012, we had cash and equivalents of $92 million. We narrowed our full year 2012 net cash burn forecast range this morning, to $18 million to $20 million, excluding cash from equity sales, and believe we have sufficient capital for our planned activities for at least the end of 2013.

I will now turn the call back to Vijay.

Thank you, JillI am sure you all saw our announcement earlier this morning, changing our timeline guidance for the release of Allovectin data. We had been predicting that we would reach the target number of death events in late 2012. We are projecting that we will reach the target number a few months later. I want to spend some time this morning reviewing the details -- the rationale behind this change.

In September, we conducted -- September of this year, we conducted a comprehensive sweep of all clinical sites to obtain patient death information. The purpose of the sweep is to eliminate any time lag between actual deaths and reported deaths, which can be several months and cause an understatement of death events.The sweep of our clinical sites was completed by September end and we now have a more accurate account of death events.

That count has confirmed that we still have not reached our target number of death events.Having said that, there's been a steady progress towards the goal. And based on the moving average of monthly events, we are now expecting to reach the goal by the middle of 2013. It appears from these circumstances that either one or both arms of the study may be running longer than our original median survival assumptions.

As a reminder, we designed our Phase 3 study based on lessons learned from our Phase 2 study, such as enrolling only chemo light patients and modifying the RECIST criteria to keep the patients on the study longer. These factors could potentially increase both response rate and survival. In addition, improving standards of care for melanoma patients, including recent approvals of new therapies, could increase survival.

In preparation for the final safety analysis by independent Safety Monitoring Board, we reviewed the final patient demographics data and identified some very useful information that I would like to share with you this morning.As a reminder, in our Phase 2 trial, 48% of the patients had Stage 4 Melanoma and the median age of patients in that study was 60. We now know that our Phase 3 trial has 63% of patients with Stage 4 Melanomaand the median of patients is age 64. Therefore, a reminder that our Phase 3 patients should not be presumed to be healthier than our Phase 2 patients.

Given the recent approvals of two new drugs based on survival benefit, it is important for our Phase 3 trial of Allovectin to provide a clear assessment of effects on survival. Waiting to achieve the target number of death events will provide improved statistical power for validation of the survival endpoint.However, the big advantage in waiting is that immunotherapy, the treatment impact may occur much later than with chemo therapy.This could result in a Kaplan-Meier with a long tail effect and a greater separation between the two survival codes at later time points.We saw this effect illustrated quite clearly last in last year's New England Journal of Medicine article on the results of (inaudible). If Allovectin has a similar effect, waiting to reach the target number may allow us to capture the separation of codes more effectively.

Independent adjudication of the primary endpoint is in progress but not yet complete.This initial time that we now have to collect the remaining survival data will allow the committee members to complete this process as thoroughly as possible. Just as a reminder, the adjudicators remain blinded to our disclosures, as stated previously our goal is to [inline] both the response rate and survival databases and to announce the results simultaneously.

On the final note on Allovectin, the Safety Monitoring Board conclusion from the final safety review of Phase 3 was that the treatment with Allovectin -- and I'm going to quote them -- has no basis for any concern that there is undue risk. End of quote. It's noteworthy that Allovectin has demonstrated an excellent safety profile in earlier studies.

We are pleased with the trial's progress to date and eager to reach the completion. We are also encouraged with the continued progress in the field of Melanoma immunotherapy over the past year and one-half. And more recently, with the positive data of PD-1 and PD-L1 antibodies. We believe Allovectin is well-positioned to potentially extend this progress further and validate this approach.

I just want to remind our listeners in October of this year, we expanded our Board of Directors with the addition of George Morrow, who retired last year as Executive Vice President of Global and Commercial Operations at Amgen. His commercial experience before Amgen, including two decades spent with Glaxo Wellcome and Merck. We believe George will be a tremendous asset as we advance with our preparations for the potential commercialization of Allovectin.

I'll finish with a quick review of other key programs. We have been working closely with our TransVax licensee and development partner, Astellas, to finalize the design of the two trials.We are very pleased with our partner and the progress they have made, a multinational pivotal Phase 3 trial and recipients in hematopoietic cell transplant and a Phase 2 trial for TransVax in recipient of solid organ transplant. Our partner, Astellas, is projecting initiation of both trials in 2013. We expect to provide details on the trial, including the design and timelines, as soon as the trial begins.

HSV-2 we have continued progress in our Herpes Simplex 2 vaccine development program, as preparations for IND filing. And we plan to initiate a Phase 1/2 trial in 2013.

In September, we entered into a worldwide non-exclusive license with Bristol-Myers Squibb to use our DNA immunization technology and our adjuvant Vaxfectin in the production of antibodies as the first license for this important application of our technology. We hope this can serve as a template for additional agreements with others. The BMS agreement is also first for our Vaxfectin adjuvant, which we have been working on a variety of fronts.

On the personal front, just last week we announced the appointment of Dr. Anza Mammen as VP of Clinical Vaccines. He will be primarily focusing on infectious disease vaccine programs. Anza recently retired from a 20-plus year career with the US Army, and has a broad range of experience in vaccine development programs. We look forward to his substantial contributions to our future success.

We continued to focus on the parts of our key development programs, our top priority remains the completion of our Phase 3 trial of Allovectin. Based on the result of our recent sweep, we expect our results will be in 2013. We expect our partner, Astellas, to initiate a Phase 3 trial of TransVax in stem cell transplant recipients in a Phase 2 trial of TransVax in solid organ transplant recipients in 2013. We are advancing towards initiation of Phase 1/2 trial for (inaudible), a therapeutic vaccine for Herpes Simplex 2 in 2013.

As Jill mentioned earlier, we have sufficient financial resources to support our planned development, at least through 2013 or more.

This concludes my prepare ed comments.Operator we are now ready to open call to questions from invited participants.Thank you.

Thank you Mr. Samant. (Operator Instructions). We will hear first from Lee Kalowski with Credit Suisse.

Great. Thank you for taking my question.So on Allovectin , you are pushing it out -- the timeline out about six months. Is there anything you can say about following the sweep how many deaths you have versus how many you need? Or anything else you might be able to say about what you've seen so far that makes you think that the data will be available in 2013 -- middle 2013?

I think just a reminder, first of all, people are over overreacting to the delay.The trial started in January of 2007, by the end of this year, this trial is six months. Waiting for a few more months to get the data out is not that crazy.Okay?Take a look at the Yervoy study, they unblinded the data three years after enrollment of the last patient.We enrolled our last patient in February of 2010, so we are not that far off of what other companies have done.

And you need to remember that we are doing a single study in Allovectin-7, the landscape has changed, trying to do another study (inaudible) is going to be primarily impossible and we need to make sure that we put points on the board.And we have set up some targets of what the event rates are,And I know people are unhappy of the change, but this is the reality of clinical trials.We need to need our goals and targets.

All I can tell you, as I said, this sweep was a good sweep.We are make being progress.It's not like we are static at one point and haven't moved. But I can't tell what you the specifics of the event rates are.I'll tell you we are getting closer.

Okay.What was it that you saw that you were able to come up with a middle of 2013 estimate then? Is there any --?

Well, the way it works -- the way you do it is you do a moving average of past four months of what the patient deaths have been and then you subtract what your target number is and where you are and you divide by the moving average in a monthly basis and put a factor in that it may put a slow down and come up with an estimated timeline.Okay? Now, obviously the moving average earlier in the study was a little larger, that's why we thought we were going to do it. We did -- what we should have realized is that moving average is going to drop.But now we are getting towards the end of the study so we don't expect the moving average to be substantially different from where we are today.

All right. And you say you are going to release that and ORR at the same time.If there's further delays here, obviously the adjudication is ongoing. Is there a chance if there's a further delay, that will you would release ORR first?

I think you are speculating now when you say there is going to be further delays. You don't seem to be convince d after what I told you what the Bristol-Myers experience was.I think we have a pretty good prediction, but we are going to keep you guys informed as we go through. So I wouldn't speculate at this time what occurs.Right now our timeline is the middle of the year and our goal is to announce both the endpoint simultaneously.

Okay.Thanks, Vijay.

Thank you very much.We will take our next question from Eric Schmidt with Cowen and Company.

Thanks for taking my questions as well.Just on the --

Eric, did you have a power outage in your home?

I'm all set.Thanks for asking, though, Vijay.Living uptown is the high life here in New York.

I know that, that's why I asked that.

Just a question here on TransVax. I think the timeline there also got pushed back a little bit. I thought we were expecting your partners to start the study in late 2012. Can you speak to that and --?

I wouldn't read too much into it.First of all, let me tell you that our friends at Astellas have done a pretty comprehensive job, in terms of getting all the European experts and the US experts lined up. Most of the experts were also working at Vical.They also got some very good statisticians lined up. The trial size, all I can tell you, is larger than what we were originally contemplating.The endpoint design I think is being vetted both on the European side and the US side, so there's conformance on that.It has taken time.

They also, remember, switched from the [Roche assay] to the [Albert assay] so that's a little change. Because they wanted average (inaudible) because they are more comfortable with that assay, we were working the Roche (inaudible) assay. So when you start -- you make some changes, those have to be all incorporated into the trial design.The agency is to be informed. The sites have to informed. Just takes a little longer working with bigger, longer, larger companies. It also takes a little longer because they have procedures that has to be followed.

Also you need to understand, once they get going, their part is much bigger than ours.They are going to recruit faster.They are going to open more centers faster than we could have ever done.Yes , sure there's a little bit of delay, but they will catch up.They are a smart company.

Should we look forward to that study starting in the first half versus the second half?

Absolutely first half.I just said 2013 because then you guys say, Vijay , you told me January and it's March and its delayed. It's a few months delay and everybody is all panicking.Frankly speaking, that's a positive development today.

Okay.Thank you.

(Operator Instructions). We will now go to Howard Liang with Leerink Swann.

Thanks very much.So just going back to the Allovectin trial -- Phase 3 trial. What is the rate of loss to follow up as it compares to your assumptions -- original assumptions.

I think we are right below our assumptions, is all I can tell you, and there is nothing unusual there.That's all I can tell you.In a blinded fashion -- it's remarkable , given the fact that it's not blinded to the patients. Okay?

Okay.So the --?

Howard, it's important point because there are a lot of cases -- you ask for loss to follow, you should also have a question of drop out rates. Because when patients know what they are getting, they have the ability to walk away from the study.And both our loss to follow up and our drop out rates are within what we expected.So nothing unusual there.

Okay. So the push out is purely due to a slower rate, but not due to any operational issues?

Not to our knowledge.

Okay.And then what was the point of the independent monitoring review? The third quarter on safety, even though I think the all of the patients have been off treatment or there's nothing they could have done any way.

True, but so -- remember , the last patient was recruited February 2010. The last treatment occurred February 2012. The follow up visit occurred at the end of March. By the time they got all the paperwork that was done, the database was locked May or early June, and then it was a question of scheduling because these are all important oncologists. So that's the reason it took us two or three months after the database was locked.

Okay.

This is the final, final review and we wanted to make sure everything is sacrosanct. And that's where the information came out.And I don't know what your reaction to that information is, but I just wanted to make sure that information was clearly understood by people. That in our Phase 2 study, we had Stage 4 Melanoma patients of 48% and our median age was 60. And this study, as we completed, the number is about 63% Stage 4 and the median age 65. So much older patients than we had in the prior study.

My understanding there has been no internal low count efficacy, but does the PSMV, the independent board have any --?

No, no efficacy reviews.It's blinded to us.They need advice of a third party. The adjudication is also blinded to the adjudicators. So no, we don't have it, there's nothing. I'm not filling in any piece of information that you don't know.

No, but does the PSMV have any access to efficacy data --?

No, only on safety. We don't have access to the survival. Survival database is in a third party.

Okay.Thank you.

Thank you.And we will continue on to Ren Benjamin with Burrill & Company.

Hi, good afternoon, and thanks for taking the questions.Can you talk a little bit about when do you think the adjudication for the primary endpoint might be completed?

I don't want to give a timeline because then you will be -- all I can tell you is first of all -- it's a good question that you are asking. The adjudication process is also taking a little longer than we initially thought because we didn't realize how complex it is.This not a standard adjudication of radiological scans.There are two components to it.First is the radiological adjudication of every patient. And once the radiological adjudication is done, then three oncologists have to meet with the central radiologist and they go patient by patient, cycle by cycle. And at the end of every cycle the three oncologists and radiologists are to sign off on the computer screen.It's a long process.And they've been meeting weekends. And it's taken -- it takes a long time.It is very important, so it has taken them a little longer,as we have gone through it. So the time is -- could we speed it up if we had the data in December? Yes , putting a lot of pressure.But you know what, this gives us the time to do it right. Because these guys come up Friday night, work Saturday and Sunday, and then go back to work on Monday. That's a lot of work. They come from four different parts of country, so it's not easy.

As part of the process, Vijay , if there's a disagreement, is there a third party that's getting involved that makes the final call --?

No.

And based on how it's gone so far, have you seen much disagreement at all? Or has it been pretty straightforward?

Let me explain to you, first of all, the two radiologists actually adjudicated remotely. They are not sitting together when they read the scans.The third radiologist then looks at the scan, reads independently without those two guys being in the presence and picks one or the other, cycle by cycle , cycle by cycle. Then those two radiologists who are enrolled in the radiological adjudication are (inaudible). The third radiologist with the adjudicator sits down with the three oncologists. There is one oncologist who takes the lead, depending on the session. And they go through and they reach a consensus.Between three of them, they have the ability.That's why the radiologist -- the oncologist have to work if there is a disagreement. But they all savvy, smart people -- well-educated in treating patients.We are not enrolled in it. So we don't know what's happening in the room.

Okay.

We are not doing anything -- they are still working together.If they were fighting with each other, they wouldn't have come to the next session.They will are all working together, is all I can tell you.

Right. And just regarding the sweep, can you provide us just a little bit more color of what's involved in the sweep? You said it was all encompassing.It definitely eliminates the time lags. Is it just looking at documentation?Do you then have to go ahead and double-check that documentation?

Let me -- excellent question, first of all, Ren. What occurs normally is the patients don't like to be called once they progress from the trial and go away, they probably go to another treatment. Patients don't like to be called every two minutes, are you alive, are you alive, are you alive?So there is a fixed time based on which they call -- based on their time of recruitment --a couple of months, I don't know what the exact time is, three or six months. So everybody is not called in the month of November, for example. So if I call somebody in November, the next time I won't call him until February or March.

What we did in September is we went to all the sites and the site coordinators in the month of September actually contacted the patients or physically saw the patients.So that way we know that the bodies were there, patients are alive.So this was not a paper exercise. This is actually calling up and saying, are you there?You call up, you answer the phone.Okay, Ren is around. Thank you, Ren, how are you doing?I'm feeling good. Good-bye. I talk to you next week or next month or three months down the road.

We catch up between the lag that's there.Sometimes what occurs is I call the patient in the month of March and I'm not calling him until August, he might have died after my call, the very next day and I don't find out until the month of August.Do you follow me?

Yes.Okay.

So this is a rock solid number when you get this number at the end of September.There are no other deaths around. Okay.

Got it. Okay.Just looking at how -- I'm sure that with these new numbers, you guys are running whole new statistical analysis internally to try to figure out how things could be working. Do you have any sense or any thoughts of how a prolonged trial like this -- typically you would think this is just much better for patients and the treatment arm, but statistically, do you have any sort of idea how long the prolonged nature of this trial might affect the hazard ratio, your powering assumptions?Does it get better, does get worse? How should we be looking at that?

We generally try to avoid doing all kinds of statistical analysis, because what in the end the results are going to be the results. But there are a lot of independent people are doing analysis and floating them out. The problem is modeling this is not easy because most of the modeling is done using hazard ratios, that's the most conservative assumption. We could first separate --the concert hazard ratio assumption is an extremely conservative assumption.I think the fact that -- without doing a lot of analysis -- the fact that the trial will be almost 80 months old by the time we release the data is a testament that whatever assumptions you do on the back of envelope tell you that there is something going on here.

Okay.And just -- I know that you mentioned in the press release and in the talk here that it was a final data safety monitoring review and that it was comprehensive.Is there going to be another one in the middle of the first quarter next year?

This is it. This is the final is done now -- where the patients are off treatment now.

Okay.Switching gears real quick --Sorry.

The other point before I made about waiting -- take a look at the New England Journal of Medicine and take a look at the hazard ratio and take a look at the median survival number. It's the integrational across the (inaudible) that gives them the T value of 0.00 something. If you just took the median survival of 9.1, man, that could not have been-- if that [stuff] was drawn just after reaching the median event, it would not be statistically significant.

Just switching gears quickly to Vaxfectin and the partnership there. With the number of vaccines under trial and several big pharmas all making huge pushes into more and more vaccines. The adjuvant base seems to be coming to life quite nicely.Should we be expecting more partnerships with other potential players going forward? Or is this just something that is kind of on the back burner for you guys? And if someone comes and expresses interest, great, otherwise, it's not moving forward in your own arms.

You got me a little bit agitated here.A lot of people are claiming that they are working on adjuvants, but really there are no adjuvants. And I would just urge you to go around and look at companies that are peddling adjuvants and you have not heard a lot of what their adjuvants are doing. Vaxfectin has gone into two human studies -- two influenza studies in humans. And it has had a very good profile both from a safety perspective --obviously we need to do a lot more on safety -- but also on efficacy.

This is not even an adjuvant. It's used in an adjuvant setting. The is the core technology to generate antibodies, tells you the versatility of this particular asset that we have, which can be used for both in an antibody setting, for generating antibodies using our core technology. It can being used in cancer vaccines and also infection vaccines.

We are working with a lot of people and our work with Bristol-Myers Squibb, by the way, was going on for a number of years. And most people take the time to evaluate this particular adjuvant in their own mouse trap. And once it's in their own mouse trap, they get all excited.No matter how good our mouse trap is, they don't want to buy our data.We have a lot of irons in the fire.And so the answer is -- this is not a one-off event. We hope this should be leveraged over a long period for some other opportunities.

There's one final question, CyMVectin, anything happening there?

We continue to have discussions with people, both in the big pharma place. But we are still waiting for the guidance from the agency, which was based on the January workshop that we had. And that guidance is going to be critical in terms of partners understanding what the full scope of the clinical trial is. Its taking a little longer for the agency to come out. But hopefully when that comes out, there will be some traction.

Perfect. Thank you very much.

Thank you. We will take our next question from Ritu Baral with Canaccord.

Thanks for taking the question, guys. Are you guys changing your survival prediction for the comparator arm now that you have this slightly shifted percentage of Stage 4 patients, the 63%, and the slightly higher mean age? Or are you sticking with the 11 to 13 month previous prediction?

The way it works is -- whatever your original assumptions are, you don't change them. Those are the assumptions. Once the trial starts, whatever your statistical plan that was set in the beginning is what the plan was. And you stick with that plan.Okay? So I don't think we are changing any assumptions.We are giving you qualitative information in terms of what the facts are. So that as you judge the time that it's taken to reach the event rate, you put that in context.

No, we were not changing anything at this stage. It doesn't mean changing anything with -- the study is occurring,its already powered, so there's nothing that we can change.And being conservative and sticking what we have, makes the most sense.

Got it.Thanks for taking the question.

Thanks, Ritu.

Thank you.(Operator Instructions). We will hear from Stephen Willey with Stifel Nicolaus.

Hi, thanks for taking the question.Can you just remind us if you guys stratified on the basis of disease stage?

The answer is yes.

Okay.Actually that's all I have.Thanks guys.

Steve, you water situation is good, right? No water in the basement?

No water in the basement, thanks Vijay.

Okay.

Thank you.And we will take our next question from Katherine Xu with William Blair.

I'm just wondering, do you have any information on the subsequent therapies that the patients took?

No, we don't.The studies is randomized. And when the study started, none of these subsequent therapies were approved. So there's no specific to follow these patients once they're gone. So the answer is no. And the study is randomized.

The only thing I can tell you is that when the trial was conducted, none of the [42 line] drugs were approved. So the probability of our patients getting those two drugs during the conduct of our trial was low. And the first time that occurred was in the month of May or April, when the (inaudible) was approved in the US and subsequently September (inaudible). But we don't have what people are getting follow up.And there is no cross over in the study either. Okay. So none of the people are getting Allovectin from the controller.

Okay. So it looks like a very plausible hypothesis for this kind of observation is, of course, people living longer, like you said, in either or both arms. And but just besides this , any other operationally clinical conduct -- trial conduct-wise , design-wise , anything that you think are imbalanced or could potentially affect the outcome?

Not to our knowledge. The distribution of patients in Europe and United States is about 45/45. It maybe off by a few percent, 10% in Israel and Brazil and Canada. It's not one single site recruiting patients or anything like that.Its well distributed. Though Israel has been a good recruiting center for us, I said that publicly before.Nothing that I can think of in any particular way.Okay?So not that I know of.

Thank you.

Thanks, Kathy.

Thank you.(Operator Instructions). We will take a follow-up from Stephen Willey.

Yes, I have one additional question.Were there other stratification factors that were used in randomizing patients to either arm? And do you know, at this point, whether or not there's any kind of imbalance in terms of baseline characteristics?

The normal NDH is something that we do.There's no stratification that we do.Alan?

There were three stratification criteria, it was stage -- whether it was stage 3 or 4, it was [ECOG score], whether it was zero our one. And it was the number of injectable lesions that they had, one or more.

Perfect.Thank you.

And we have no additional questions in the queue.At this time, I'll turn things back over to our speakers for any additional or closing remarks.

Well , thank you for your time.I hope all of my callers that are from New York City have got their power back and are dry. Because I just heard on the news that there is another nor'easter or Frankenstorm coming that way. So stay safe.Talk to you soon. Thank you. And ladies and gentlemen, that does conclude today's conference.Thank you for your participation