Vical Incorporated ( VICL)

Q3 2011 Earnings Conference Call

November 1, 2011 12:00 ET


Alan Engbring – Executive Director, Investor Relations

Vijay Samant – President and Chief Executive Officer

Jill Broadfoot – Chief Financial Officer


George Farmer – Canaccord

Nathan Cali – Noble Financial

Reni Benjamin – Rodman & Renshaw

Nicholas Bishop – Cowen & Co.

Boris Peaker – Oppenheimer



Good day. Welcome, ladies and gentlemen, to the Vical Incorporated Financial Results Conference Call. At this time, I would like to inform you that the 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 the invited participants after the presentation.

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

Alan Engbring Executive Director , Investor Relations

Hello, everyone. Welcome to our third quarter 2011 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 2011 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.

Vijay Samant – President and Chief Executive Officer

Thank you, Alan, and welcome. We have made terrific progress in our key development programs during the third quarter and the momentum is continuing as we approach year-end. I’ll provide an update on these programs today, but first let me pass on to our CFO, Jill Broadfoot, who’ll start the call with a review of our third quarter financial results.

Jill Broadfoot – Chief Financial Officer

Thank you, Vijay. Our TransVax license agreement with Astellas drove financial results for the third quarter and is expected to have a continued impact. As we reported earlier today, third quarter 2011 revenues were $26.6 million, compared with $2.3 million for the third quarter of 2010, which was primarily a result of the initial upfront payment recognized under the TransVax license. With relatively flat operating expenses quarter-over-quarter, the increase in revenues resulted in a net income of $16.4 million for the third quarter of 2011 compared with a net loss of $6.8 million for the third quarter last year. We ended the third quarter with cash and investments of approximately $62 million and we expect to end the year with cash and investments of $53 million to $56 million.

As we advance through the development of TransVax over the next few years, we expect to receive ongoing reimbursement by Astellas of our costs for TransVax related activities, which should offset a portion of our operating expenses. We will provide net cash burn guidance for 2012 when we announce year-end 2011 financial results in February.

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

Vijay Samant – President and Chief Executive Officer

Thank you, Jill. I’ll start today with our lead program, Allovectin for metastatic melanoma. As we approach completion of our pivotal trial, the excitement around this novel immunotherapy is increasing and we are starting to get frequent questions on some common topics in our one-on-one sessions or our face-to-face presentations. I wanted to take this opportunity today to address some of those questions in the single forum so everybody has the same answers.

The first question is what is the efficacy potential of Allovectin. Let me remind you that in our Phase II trial we focused on two efficacy endpoints, response rate and survival. We had 15 responders out of 127 patients for an overall response rate of about 12%. The median duration of response was 13.8 months. Overall survival in our Phase II trial was 18.8 months compared to a typical chemotherapy survival range of 6 to 11 months.

So our numbers look good in Phase II, but let me explain why we expect our results in Phase III to be even better. First, we wanted to select patients in our Phase III trial who had the best chance of living long enough for Allovectin-7 to work. Chemotherapy takes a toll on overall health and especially in the immune system, so chemo-naïve patients have a healthier constitution. In our Phase II trial, the majority of our responders were chemo-naïve. In fact, patients who were chemo-naïve had a response rate almost twice the rate as patients who had prior chemotherapy. So Allovectin simply works better in chemo-naïve patients. We have, therefore, enrolled only chemo-naïve patients in Phase III.

We have also enrolled healthier patients with no brain or liver mets and normal LDH, which should help us. To our knowledge, we are the first company to use LDH as a marker for recruitment in a melanoma trial. In addition, we measured LDH at our central lab to eliminate side-to-side variability in testing. For patients in our Phase II trial who met all the Phase III eligibility criteria, the response rate could have been about 17%.

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