Brickell Biotech Inc (BBI) 2013 Q1 法說會逐字稿

Good day and welcome, ladies and gentlemen, to the Vical Incorporated financials 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 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, and welcome to our first quarter 2013 financial results conference call. Participating on the call today are Vical's President and Chief Execute Office, Mr. Vijay Samant; and Vical's Chief Accounting Officer, Mr. Tony Ramos. 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 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 From 10-Q filed with the Securities and Exchange Commission, as well as the specific risks and uncertainties noted in Vical's news release on first quarter 2013 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. Today we'll provide updates on each of our key development programs and discuss our expectations for the remainder of 2013. Let me introduce Tony Ramos, our Chief Accounting Officer, who begin the call with a review of the first quarter financial results. Tony, you're on.

Thank you, Vijay. We reported financial results for the first quarter of 2013 earlier today. Revenues were $1.6 million for the first quarter of 2013 compared with $11.5 million for the first quarter of 2012. The decrease in revenues was primarily a result of the $10 million milestone payment from Astellas last year for progress in the TransVax CMV vaccine program. Research and development expenses were $3.7 million in the first quarter of 2013 compared with $6.4 million in the first quarter of 2012. The decrease in R&D spending primarily reflects a sub-license payment we made in the first quarter of 2012 related to the Astellas milestone payment. Manufacturing and production expenses were $3.7 million in the first quarter of 2013 compared with $2.5 million in the first quarter of 2012. The increase in manufacturing production expenses was driven primarily by increased activity related to the Astellas agreements.

General and administrative expenses increased to $3.5 million in the first quarter of 2013 from $2.7 million in the first quarter of 2012, primarily as a result of higher compensation costs, which included the accrual of post-termination benefits related to our CFO's resignation. These changes in revenues and expenses yielded a net loss of $9.3 million for the first quarter of 2013 compared with net income of $200,000 for the first quarter of 2012. Our first quarter 2013 net cash burn was approximately $8 million, which is consistent with our first half forecast range. We ended the first quarter with cash and investments of $78 million. With that, I will now turn the call back to Vijay.

Thank you Tony. We made an important announcement today that we expect to complete the analysis and release top-line results for both endpoints simultaneously during third quarter of 2013. Let me begin and walk you through our Allovectin program and get to that timeline. As you know, our Phase III trial of Allovectin with chemotherapy, which is the standard of care when the trial started in patients with metastatic melanoma. Our primary endpoint is response rate at 24 weeks or more after randomization. Our secondary endpoint is overall survival.

With the current melanoma treatment landscape the way it is, meaning two new products have been approved for survival, we do believe that survival will be an important endpoint both for the approval process and for the commercial success of Allovectin. In our last quarterly conference call we discussed the importance of waiting for survival data to mature. Our focus today in our recent progress and our path forward. As scheduled, we conducted a follow sweep on all active clinical sites in March to get a real-time assessment of survival status. After completing the sweep, we met with a group of melanoma experts to review the progress to date in the Phase III trial in our projected path to completion and are now pleased to confirm that we are on track to reach our target number of death events in the middle of 2013.

Once we reach the target number of death events, our clinical sites will submit final reports for each patient or survival database vendor. After data entry and quality checks, an independent audit will be conducted and the survival database will be locked. Meanwhile, the independent assessment and adjudication process for the primary endpoint is also approaching completion at our response rate database vendor. We expect data entry and final quality checks to be completed in the coming weeks, which will allow the adjudicated response rate data to be locked in July. Remember that both primary and secondary endpoint data remain blinded to the database vendors and to Vical throughout this process.

Once we are notified that both data sets are locked, we will initiated the transfer to our secure server and unblind both databases and run the unblinded data through a statistical analysis program. We expect to complete the analysis and release top-line results for both endpoints simultaneously during the third quarter of 2013. We expect completion of this pivotal trial with great anticipation and we look forward to -- like all of you, to seeing the results. Next I'll provide quick updates on our other key development programs.

TransVax. Since our last call we have continued to advance the TransVax program in close collaboration with our partner, Astellas. We confirmed our prior guidance in a news release earlier today that Astellas is expected to initiate a multi-national, pivotal Phase III trial of TransVax for hematopoietic cell transplants in the first half of 2013. A planned Phase II trial of TransVax in patients -- in recipients of solid organ transplants is expected to begin soon afterwards. As before we intend to provide details and trial design, including endpoints and timelines, when this trial begins.

Herpes simplex 2 in our vaccine developments program for HSV-2, we are beginning with a therapeutic application to help control outbreaks in shedding in people who are already infected. This application alone represents a significant unmet medical need and a large commercial opportunity, with more than 500 million people are currently living with chronic HSV-2 infections worldwide, in about one of every six people in the 15 to 49 age group. And [our] drugs are even not available in some parts of the world, are not effectively used by a majority of these patients. Viral shedding and transmission to partners is a chronic problem whether the patients suffer from periodic lesion outbreaks or not. I'm please to report that we are approaching completion of our pre-clinical safety talks and by distribution studies in the program is advancing on track to initiate a Phase I/II trial in the second half of 2013.

Vaxfectin I will conclude with some promising data for our Vaxfectin adjuvant, earlier this week we announced the publication of preclinical results from Baxter's evaluation of our Vaxfectin adjuvant in combination with several of the cell culture [influence the] vaccines. Baxter simply mixed Vaxfectin with their vaccines, which are both seasonal and dynamic strains of influenza and found substantial increases in both antibody and [C] cell responses compared with non-adjutivated vaccines. Progress in the adoption of new influenza vaccine technologies has been slow and sporadic, given by periodic pandemic outbreaks that highlight the shortcomings of historical approaches. Seasonal influenza vaccines provide limited protection, especially among elderly who need it the most.

Emerging strains of potentially pandemic influenza I like the 87n line strains spreading in Asia right now strain the time and capacity limits of our current production methods. We believe that an adjuvant that could improve the efficacy of seasonal influenza vaccines and provide [dose] spreading announcements of pandemic influenza vaccines would be of tremendous value to vaccine providers and the affected populations. Just to remind you, when we entered into two license agreements for Vaxfectin last year, one with Bristol Meyers Squibb for the production of antibodies in the [si vax] for malaria vaccines. We look forward to continued discussions with other potential licensees. Hope to see Vaxfectin applied for more broadly in the years ahead.

In conclusion, for the remainder of 2013, we expect to reach milestones in each of our key development programs. We expect to reach the target number of death events in our Phase III trial of Allovectin in May 2013, to lock the adjudicated response rate data in July 2013 and to release of the top-line results for primary and secondary endpoints in the third quarter of 2013. As [techlas], as I said before, expects to initiate a Phase III trial of [TransVicon] stem cell transplant patients in the first half of 2013 and a Phase II trial of TransVax in solid organ transplant to appear soon afterwards. We plan to initiate a Phase I/II trial of our vaccine for HSV-2 in the second half of 2013. That concludes our prepared comments today. Operator, we are now ready to open call to questions from our invited participants.

The question-and-answer session will begin at this time.

(Operator Instructions)

Ritu Baral, Canaccord.

Vijay, is there anything that you have seen in the sweep of the data of the [non emma] trial to change your estimate of placebo survival of about 12 months?

No, remember the sweep is all done in a blinded fashion, so all the data is blinded to us. All we know are the number of death events. We have no idea which arm they are in. Just to remind you that our trials started in Jan of 2007. It included the last patient in Feb 2010. The two-year follow up was Feb 2012, so we are pretty long [bearded] to this trial, okay? But going back to your question, we have no clues of that particular effect. But I have [gone] in my prior conference calls and my public presentations, we have done a pretty exhaustive analysis of literature including our old Phase III study in low-dose Allovectin and we still believe that the numbers are [equal] to 14 months in that range.

And could you remind us again the breakout between stage 2 and stage 3 in your Phase II, versus what you are seeing in the Phase III?

I know the Phase III number -- I think it is 63 stage 4 and 37 stage 3 [to take down], and it's about 50/50 in the Phase II study. So we have sicker patients. Also the median age in this group is in the mid-60s versus [amman 16s] with the --

16 Phase II; 64 in Phase III.

64 in Phase III; so all the patients are sicker patients. This is composite population, including both arms together.

One quick follow up, the Astellas CMV solid organ transplant trial -- are the endpoints for that set? Can we just look at historical trials for solid organ transplant CMV and know how that trial will look? And I am assuming that when you say that the trial will start soon afterwards, we are talking about a 2013 start for that trial?

Yes. Absolutely.

I think just since you brought the subject of transplants, I might as well cover.

The hematopoietic cell transplant is the first trial that will start. We are pretty eager, as soon as the trial starts, to walk you through the trial design, including the endpoints, because I think Astellas has done absolutely fantastic job in terms of coming up with a very appropriate endpoint which will work on the strengths of our technology and also will have clinical, meaningful benefit; as opposed to using an endpoint that a lot of people use, such as progression-free survival in cancer would be a an example, which really does not tell you whether it benefits survival in the long run. We can wait as soon as the trial starts to tell you what the trial design is, what the endpoint is -- and the more important thing is, they have actually gone and harmonized all those -- that endpoint across the three regulatory agencies, primarily Europe and United States, but also Japan; and it is a worldwide trial. I think that should be the first stage of it.

The second stage of that after that will be the solid organ transplant study. The endpoint for that is going to be different from what's in the hematopoietic cell transplant study, but we are not at the liberty to disclose what that. But again, that is a pretty straightforward endpoint, very much in line what people have used in the past, depending on which study you look at. I think that also will play on the strengths of our technology. Also, hopefully providing an equal clinical benefit.

Howard Liang, Leerink Swann.

I think Amgen recently said that they think for T-Vec is potentially filable based on the durable overall response rate data, with some overall survival, maybe with a trend. Do you think that you still need both overall response rate and overall survival to both hit in order to file?

I think the issue is not with the filable, the issue is whether it is going to have a commercial potential. The two products approved on the basis of survival already on the market and a couple more products coming, such as the GSK products, potentially PD-1 and PD-L1, which are going to demonstrate hopefully lots survival advantages. If you do not have a product that shows benefit with survival, even if you get through the FDA because you have an SBA and the advisory committee approves it because -- the [orlack] approves it because you met your primary endpoint and you're showing some trends in survival, commercially it is going to be hard to push that product through the system.

We believe that in order to make a commercial dent and we believe Allovectin has some other advantages compared to some of the competition out there -- without getting into those with detail -- I think survival we believe is an important element of making Allovectin a commercial success beyond approval.

I have a question on a combination -- based on the mechanisms of action, would Allovectin be more combinable with PD-1 or T-Vec? And also, is T-Vec combinable with Allovectin?

You need to understand, T-Vec, from what understand from their public announcement, it is a herpes simplex 2 replicating virus, which is encoded [GMCS at that bennet]. It's a completely different mechanism than Allovectin. Let me talk to you why Allovectin would be a combinable with a PD-L1 or Yervoy, right? In most melanoma -- you can go to the literature -- only 30% to 40% of cancer cells have T-lymphocytes infiltrates into the cancer cells, meaning the melanoma actually is not recognized with the immune system so there are no T cells, T-lymphocytes in there.

Remember what Yervoy does when there are T cells. It's to make sure those T cells are -- through the checkpoint elimination mechanism with the PD-1 or Yervoy, make sure those T cells do their job. Remember what Allovectin does -- Allovectin, by expressing HLA-B7 [on the surface] creates an important immune reaction so you get a whole bunch of T cells that are activated. See, a whole bunch of T cells are activated and the T-lymphocyte infiltration in tumor increases, then the checkpoint [innovation] should work better with that mechanism and that is why that combination ought to work.

I'm not clear, I do not know mechanistically how T-Vec would actually help in that combination study. I'm not seeing Amgen in their public definition address any pre-clinical studies demonstrating the advantage of combination of T-Vec. At this point I cannot comment on their drug. We definitely have, mechanistically at least, in ensuring that animal models of the [samples] are going to help us.

Lastly, on the timeline, I think you give a fairly specific timeline of database lock in July. So does that mean that you already have reached a pre-specified number of events?

No, no. We said we expect to reach the specific number of events by the middle of 2013.

(Operator Instructions)

Jonathan Eckard, Citi.

I was wondering if you could remind us of what other published literature or published information that is about the different vaccines that you've combined with your adjuvant and just remind us to date what ones you have combined with it and [the earliest date] available?

We have published actually series of publications which we have tested it in the morality of DNA vaccines. We have tested in the morality of cancer vaccines. We have also combined with killed vaccines -- so a variety of papers have been published. But just quickly -- and we'll make it available to Alan if it is not on the website, we'll put it on the website. Just go over the DNA vaccines -- we have done two studies with H5, one study with swine flu, we have done now a generation of antibody study with Bristol-Myers group which lead to a license. We have two more studies, one more study going on influenza with another company. We just published a study with influenza with Baxter with a killed vaccine; we're doing a malaria vaccine with [Civax]. We've done two cancer studies on our own.

In every case we have demonstrated that this adjuvant has an uncanny ability to increase the new responses in the target matrix that we are studying. It's not a molecular adjuvant such as a DLR9 molecular adjutant or TLR5, because those adjuvants are very potent but at the same time they are [smart to] immunity issues as you've seen over the years with a variety of adjuvants that have come to -- I don't know whether you saw one of the GSK adjuvants is involved in narcolepsy. There's a lot of investigation going on. This is a swine flu vaccine which is adjuvant to [the] GSK [I forget] one of the AS numbers. It has caused narcolepsy.

Adjuvants are a double-edged sword. You want to make sure they're sufficiently generic and not too molecular so that they don't create the side-effect profile that you don't want them to create. I think we believe so far in the data that we have got in humans and animals that we have a pretty balanced adjuvanted approach with this adjuvant that we have. I will make sure all the papers are on our website if they're not already on it, okay?

If you could just help us understand -- so the herpes simplex 2 virus vaccine, it sounds like most of the pre-clinical data is coming to a wrap. What would be the next gating factor in getting this trial up and running? Is it design, manufacturing supply -- and I'm guessing -- when in the second half were we thinking that you're really trying to aim for?

It is all about balancing resources. The Allovectin data is indeed as we expected to be in the right direction. We're going to put a lot of resources behind Allovectin. That does not mean were going to neglect herpes simplex 2. But then it's a balance of resources, because the same people have to work on it. So we have -- right now our energies are focused be on Allovectin. Having said that, we are studying [reagents weak] to the system. As I told you [traybe a please] with all the pre-clinical [thought] studies progressing well, I think there are no gating factors. We just got to get it done.

We have to file an IND, the manufacturer supplies -- we need to make sure we complete the manufacturing, fill the lots. We've already done a lot of work, by the way, on the clinical trial design -- all the expert committee meetings have taken place. So we have a clinical trial synopsis in place. The clinical trial protocol is being written. So we're in good shape. It is just balancing the resources. That is why I'm hesitating in predicting the exact time when we will start the study.

Stephen Willey, Stifel Nicolaus.

Vijay, just to clarify your prior comments, will you not be filing then without achieving statistical significance on OS? Or is it one of these things whereby -- is this one of these things where you need to see the data and then meet with FDA to make a decision?

Absolutely. To sit here and say, well, that I'm going to do this, I'm going to do that -- it doesn't make sense. You have got to look at the quality of the data. You got to look at quality of the safety profile of the drug, you look at the quality of the response rate data, you look at the quality of the survival data, and you put all those three together and make that call.

What I'm saying is, having said that, survival right now with the way the landscape is an important element, but I'm not ruling anything out. We put a lot of effort behind looking at, will this drug work for 15 years now and we are pleased that we have reaching completion right now. I keep on giving this analogy of traveling from Ohio to Rockefeller Center when we are coming out of the tunnel now. We've just got to decide how we're going to go to the east side or to get to Rockefeller Center -- are we going to take 42nd Street or are we going to go 34th Street? Are we going to go uptown and go downtown? Are we going to downtown and go uptown? But if you have that luncheon appointment at noon at that Spanish restaurant in the MetLife Building, we need to be there. Which is the third quarter. Even the --

Well said.

Going back to the synergy you spoke of between Allovectin 7 and the checkpoint inhibitors that you've seen pre-clinically, what is the opportunity that you think you might have in terms of tapping into your KOL base and getting some investigator-initiated studies up and running? I know that there are some that are already ongoing looking at vaccines and checkpoint inhibitors in some other solid tumor types.

I think the important thing is the -- it really is response or the company that owns the PD-1 has to agree with the clinical investigator at KOL to do the study. I think once we come out with the data and if we believe that the data is going to be good as it should be, and if the data really needs the endpoints that we are describing, there will be more than one study going on, with a variety of those sponsors; because it is in their best interest if the drug demonstrates what we have demonstrated in Phase II -- it is an ideal drug to combine with all the other toxic drugs to see if there is benefit, and decide on the one-two punch theory.

Just a quick TransVax question -- I know that there was a competitive registrational study that just posted not too long ago. It looks like they're using a fairly straightforward endpoint with respect to CMV reactivation. Based on your comments, it sounds like yours is a little bit more complex than that. Is that a safe assumption to make at this point?

I think when we said that we are going to use CMV viral load, everybody told us that, Vijay, you're crazy. The agency will not agree with you on CMV viral, or not everybody is believing viral load as opposed to CMV disease is getting -- is the fad of the day. I think they are [started] to even better. I think it is uncomplicated. It is actually a simpler endpoint than CMV viral.

Look, CMV viral load is a complicated endpoint in one way, particularly as an [articolic sub primes condrations] because you need to make sure you need to use a central lab. You need to make the algorithms at the local hospitals have to be managed with this, right? But I think we -- Astellas has done a wonderful job. And just wait for a couple of -- in the near future we'll be able to tell you what it is.

And then just to --

By the way, just want to remind you, since there are competitive trials going on -- but those are antivirals. Remember this is a vaccine. Vaccine is very important, because it teaches the immune system [to empower it to] kill the viruses. And particularly in solid organ transplant patients where you have the risk of reactivation throughout your life, vaccine is going to be far more effective than antivirus. I just want to make sure that --

And I'm presuming that you're going to preclude the use of investigational agents, post-vaccination, in the study. So do you foresee any enrollment challenges within the stem cell setting itself, just in terms of as you look at the Phase III and some of the other things that are ongoing competitively?

No, I do not think so, because we have a pretty good, along with Astellas which has [prografts] and they have a great reach with all the important KOLs. We thought we had most of the KOLs lined up. We are surprised that they have relationship with our KOLs beyond them. They know a lot more other people, they know a lot of clinical settings, they know where the patients are, whereas some of the other new companies don't know this. Recruiting a trial is an art form more than a science, and that is where they have their strength.

At this time there no further questions. Mr. Samant, I would like to turn the conference back over to you for any concluding remarks.

Thank you all for participating. We hope to see some of you individually at one of our scheduled presentations before the next conference call. Again, thank you very much; we look forward to Allovectin results in the third quarter of 2013.

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