Tony Ramos – Vice President-Finance and Chief Accounting Officer Vijay Samant – Chief Executive Officer and President Larry Smith – Vice President-Vaccine Research Anza Mammen – Vice President, Clinical Vaccines Igor Bilinsky – Senior Vice President, Corporate Development.

Mark Breidenbach – HC Wainwright..

Good day, and welcome ladies and gentlemen to the Vical Incorporated Financial Results Conference Call. At this time, I would like to inform you that this conference is being recorded and then all participants are in a listen-only mode.

At the request of the company, we will open the conference after question and answer from invited participants after the presentation. [Operator Instructions] I will now turn the conference over to Mr. Tony Ramos, Vical’s President and Chief Accounting Officer. Please go ahead, sir..

Hello, everyone. Welcome to our second quarter 2015 financial results conference call. Joining me on the call today is Vical’s President and Chief Executive Officer, Mr. Vijay Samant; Vical’s Senior Vice President, Corporate Development, Dr. Igor Bilinsky; Vical’s Vice President of Vaccine Research, Dr.

Larry Smith; and Vical’s Vice President, Clinical Vaccines, Dr. Anza Mammen. 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 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 its second quarter 2015 financial results.

These forward-looking statements represent the company’s judgments and expectations as of today. The company disclaims 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 Tony and thank you to our participants for joining the call this morning. As Tony will report we have continued to manage our financial expense to such that the company is well positioned to continue our planned development efforts. On the call today, Dr. Larry Smith will discuss the status of our CMV programs, Dr.

Anza Mammen, will give you an update on an ongoing herpes simplex Phase-1 II Trial, and Dr. Igor Bilinsky will provide an update on our antifungal product candidate, VL2397. But before that we will begin the call today with the review of our financial results by Tony Ramos. Tony, you’re on..

Thank you, Vijay. We reported financial results this morning for the second quarter of 2015, which reflect our ongoing efforts to advance our CMV program licensed to Astellas, completing ongoing HSV-2 clinical trial, as well as planned development activities related to our newly and licensed antifungal compound VL2397.

Revenues were $4.2 million for the second quarter of 2015 compared with $4.5 million for the second quarter of 2014.

The decrease in revenue was primarily a result of a decrease in vaccine deliveries to be used in clinical trials, which was partially offset by an increase in process development work under our contract with Astellas related to the ASP0113 vaccine program.

We had a net loss of $2.8 million for the second quarter of 2015 compared with $4.4 million for the second quarter of 2014. The decrease in our net loss compared to the second quarter of 2014 was due primarily to a decrease in the net recognition and deferred expense related to the manufacturing of ASP0113 for Astellas.

Our cash burn for the second quarter of 2015 was $2.59 million compared to $2.69 million for the second quarter of 2014. Our cash burn for the first six months of 2015 was $5.4 million. We ended the quarter with $43.79 in cash and investments.

We are pleased to update our 2015 full year cash burn guidance to a range of between $9 million and $12 million, which is down from our previous forecast of between $12 million and $15 million. The reduction in our estimated cash burn rate was primarily due to the addition of contract manufacturing activities with the IPPOX Foundation.

We currently anticipate that our available cash and investments is adequate to fund our activities into 2017. I will now turn the call over to Dr. Larry Smith..

Thank you, Tony. ASP0113 is our therapeutic CMV vaccine partnered with Astellas. That is designed to prevent CMV infections and associated complications in transplant recipients. This vaccine is undergoing testing in two major clinical trials. The first one is a global pivotal Phase 3 trial in HCT recipients.

The second is a global Phase 2 trial in SOT recipients. With regards to the Phase 2 SOT trial, we announced in May that the trial was fully enrolled which was nearly one year ahead of schedule. A total of 150 kidney transplant recipients were involved at approximately 80 centers in United States, Europe and Australia.

As a reminder, this is a randomized double blind placebo control study and CMV seronegative recipients will receive a kidney from a CMV seropositive donor. This group is at the highest risk for developing CMV viremia, which will typically occur about 50% of subjects.

This group also have a substantial risk for developing CMV disease, which will typically occur in about 35% of subjects within the first one year after transplantation.

All subjects in the current Phase 2 trial will receive 100 days of Valganciclovir and will be randomized one to one to receive five doses of either ASP0113 vaccine or a placebo at one, two, three, four, and six months after transplantation.

The primary end point of this trial is the incidents of CMV viremia and the study is powered to show an approximately 50% reduction in CMV viremia at one year after transplantation. We expect topline data to be available in the second half of 2016.

With regards to the Phase 3 HCT trial, the primary endpoint will include overall mortality at one year after transplantation. This endpoint has potential to support full approval in key markets with no post approval trial requirements. This is a large global trial that will enroll a total of 500 CMV seropositive HCT recipients.

Enrollment is ongoing at 95 clinical sites among 11 countries in North America, Europe, Australia and Asia. The trial is now over 50% enrolled. Initiating all of these clinical sites globally is just taken longer than Astellas originally expected.

Based on the current trial enrollment trends, Astellas has updated its enrollment projection and now expects enrollment to be completed in the third quarter of 2016, instead of the original plan of the end of 2015. We anticipate topline date in the fourth quarter of 2017.

With regards to the one year follow-up of the first 100 subjects, we have not yet reached that time point, but we expect to reach it later in 2015. It’s important to point out that these two vaccine trials are being conducted and fully funded by Astellas.

Our support for these trials including manufacturing regulatory clinical support is fully reimbursed by Astellas. Let me add that we together with Astellas are gearing up for manufacturing a scale of activities in anticipation of a potential commercial launch of ASP0113.

If clinical development is successful, Vical will be responsible for producing both drug commercial supplies at our manufacturing facility in San Diego. This is an exciting time as we advance toward the potential approval of the first CMV vaccine and the first DNA vaccine for human use.

In summary we are very pleased with our working relationship with Astellas. They have significant commercial experience in the transplantation field and are an excellent partner for our CMV vaccine program. Next, I wanted to provide a brief update on the status of our CyMVectin program.

CyMVectin is our prophylactic DNA vaccine designed to prevent CMV infection in women of child-bearing potential. This vaccine is comprised of our gB-encoding plasmid formulated with our proprietary adjuvant Vaxfectin. In April we announced new preclinical data in collaboration with Drs.

Michael McVoy and Stuart Adler of Virginia Commonwealth University. The study found that vaccines including gB provided both fiberblast and epithelial entry naturalizing antibody titers that were comparable to those observing from humans with naturally acquired CMV infections.

The data suggest CyMVectin has the potential to include – neutralize the antibodies against a broad range of cells. We have signed an agreement with VCU to conduct an investigator sponsored Phase 1 clinical trial to determine the epithelial entry and fiberblast entry neutralizing antibody responses in normal healthy subjects who are CMV seronegative.

We will provide greater details on this program in our next earnings call. Lastly, I wanted to provide a brief update on the status on AnGes ebola program. Our partner AnGes, they have seen the development of a potential therapeutic approach for ebola, based on equine polyclonal antibodies.

Using the Vaxfectin formulated DNA vaccine, glycoprotein that was manufactured by Vical, AnGes initiated a study in March of 2015 to examine the antibody production in horses injected with the vaccine. The primarily result showed a pronounced increase in the antibody titers against the ebola glycoprotein.

Based on these encouraging results, AnGes is now planning further development of this potential therapeutic equine polyclonal antibody therapy for ebola. I will now turn the call over to Dr. Anza Mammen..

Thank you, Larry. As we announced in June, our therapeutic vaccine against general therapies designed to reduce genital lesions and viral shedding in HSV-2 infected patients did not meet the primary endpoint in the ongoing Phase 1/2 study.

The bivalent vaccine met two prospectively defined secondary endpoints of their vaccine group, demonstrated a statistically significant reduction in shedding rate, which is upon founding results. The trial is continuing as planned. We will follow all subjects for a period of 12 months for safety and nine months for efficacy following their last dose.

The study design includes a second post-vaccine swapping period to assess the change in lesion rate within each group from the pre-vaccine swapping period. The other clinical endpoints that we are following is lesion recurrence rate over the nine months following the last vaccine dose.

The lesion recurrence rates will be compared between each vaccine group and the placebo over this nine months’ time period. Lesion rate and recurrence rate are important clinical endpoints from a product licensing prospective. These clinical endpoints and the immunology data will be available in December.

Based on these data we will consult with our expert adviser to define the next steps for our HSV-2 program. I will now turn the call over to Dr. Igor Bilinsky..

Thank you, Anza. Now a brief update on the VL2397 program, formerly known as ASP2397. Development VL2397 continues on track; through an IND initiation and the initiation of a Phase 1 clinical trial in the first half of 2016. VL2397 is a novel small molecule antifungal compound that in-licensed from Astellas Pharma in March of this year.

It augments infectious disease pipeline and similar to our ASP0113 CMV product is intended to use predominantly in immunocompromised patients. VL2397 has a novel mechanism of action and represents a potential new class of antifungals that enters the cell through the 61 pathway.

It is designed to treat invasive fungal infections, such as invasive aspergillosis, which has upward 50% mortality in high risk immunocompromised patients despite currently available therapies. Astellas developed this compound through preclinical studies and presented data for the first time at the ICAAC conference in September of last year.

Astellas demonstrated in preclinical studies that VL2397 has rapid fungal cell kill activity, which was faster than marketed antifungals.

The compound also demonstrated activity against azole-resistant fungal species and it appears to have low propensity for P450, drug-drug interruptions, which will be a major advantage compared with many of the currently available antifungals.

We together with Astellas plan to present additional preclinical data at the upcoming ICAAC conference in San Diego in September of this year. Our poster has been accepted by ICAAC. We have also extended our antifungal advisory board with key opinion leaders in the antifungal field including Dr.

John Perfect, Chief of Division on Infectious Diseases at Duke, Dr. Tom Patterson, Chief of Division of Infectious Diseases at the University of Texas Health Science Center in San Antonio, Dr. John Wingard, Director of Bone Marrow Transplant program at the University of Florida, the Health Cancer Center, Dr.

Oliver Cornely [indiscernible] and President of the European Confederation of Medical Mycology, Dr. Peter, Professor of Medicine at the University of Alabama and Director of [indiscernible], Dr. Dennis Schmatz, veteran of Merck lead Development of [indiscernible] and Dr. Mike Hodges, veteran of Pfizer who lead development of [indiscernible].

We have also assembled the world-class team of industry veteran consultants with specific expertise in small molecule anti-infectives and anti-fungals preclinical from oncology, toxicology regulatory and CMC areas.

As you know the regulatory environment in the US is evolving and there is increasing support for expedited development path for novel anti-infectives therapies.

For example, the GAIN Act of 2012 and the 21st Century Cures Act recently passed by the House [indiscernible] to regulatory approval based on small efficacy trials in well-defined patient populations.

We are very excited about this possibility and are working with our advisors on exploring these options for development of VL2397 in-invasive aspergillosis or other rare fungal diseases. We also intend to engage closely with the FDA to identify an optimal development path for this program, which may allow approval.

In summary, we expect to initiate a Phase 1 study of VL2397 in the first half of 2016 and Phase 1 antifungals can be very informative providing both safety and pharma information. In order to show that drug blood levels required to efficacy can be achieved in humans.

And finally I’d like to give you a quick update on our manufacturing contracts with IPPOX. Our work is progressing on the contract with IPPOX Foundations to manufacture HIV DNA vaccine candidate.

Vical has also formerly joined the P5 partnership or the Pox Protein Public Private Partnership, that seeks to advance and potentially license HIV vaccine candidates that have the potential to achieve a broad public health impact. The P5 receives the core funding from the Bill and Melinda Gates Foundation and the NIH.

The vaccine manufactured by Vical is expected to be used as a priming component of a prime boost vaccine regiment that will be evaluated in additional Phase 1 studies and potentially in the Phase 2b clinical trials. We expect material delivery to begin under this agreement in the fourth quarter of 2015. I will now turn the call back to Vijay..

Thank you, Igor. In summary, all our clinical programs continue to be advancing according to plan. Astellas expects to complete patients enrollment in its Phase 3 trial of ASP0113 in stem cell transplant recipients in the third quarter of 2016. Astellas anticipates the topline data to be a [indiscernible] in the fourth quarter of 2017.

ASP0113 in [indiscernible] and transplant recipients is fully enrolled, due to the one year fall off period Astellas expects the data to be available in the second half of 2016.

In July, we signed an agreement with the Virginia Commonwealth University that allow the University to conduct and investigate a sponsored Phase 1 clinical trial product candidate. We’ll tell you more about that in our next earnings.

The HSV-2 trial continues planned will follow the subjects for a period of 12 months for safety and nine months for efficacy. Additional efficacy data will be available in December in 2015 including clinical endpoints such as lesion rate, lesion recurrence date, as well as immunological data.

Based on these data, we will determine the next steps for this program. Finally we are making progress towards filing IND for VL2397, our antifungal, which we recently licensed from Astellas. We expect to start a Phase 1 trial in the first half of 2016.

Vical together with Astellas plans to present additional preclinical data at the upcoming ICAAC conference in September. This concludes our prepared comments for today. Operator, we are now ready to open the call for questions from our invited participants. Thank you..

Thank you. [Operator Instructions] We'll go first to Stephen Willey with Stifel..

Hi, this is [indiscernible] on for Steve today. Thank you for taking my questions. So can you elaborate on the enrollment rate and the chemo HSV trial.

Is it site activation or ongoing trial from the competitor that’s slowing down the enrollment, can you please elaborate on that?.

I think Astellas has done a very good job, but remember this trial is improving in the US, Europe, Japan, Korea and Taiwan, and despite the decision has taken longer than expected, but Astellas is assured that the rate of recruitment that they’re seeing and now that all the sites are fully initiated, they’re confident that the enrollment will be completed.

I don’t there is anything to do with the competition with other programs. .

And then lastly what do you need to see from the nine and 12 months data from the HSV-2 trial to continue to develop HSV-2 vaccine..

I think first of all we will be following patients 12 month for safety and nine months for [indiscernible]. I want to assure everybody first of all the trial is continuing this plan.

By December, we’re going to have a lot of new data, particularly clinical data as it relates to lesion rate, recurrence rate and then including immunological data, which would all back data together in the context of what we saw in the first swapping period, what we’re going to see in the second swapping period.

We have an excellent group that will assist us in making the right decision on this program some time by the end of this year. We’ll probably communicate that to you early next year. But everything in the program is going well so far..

Okay. Thank you..

Well go next to Mark Breidenbach with H.C. Wainwright..

Hi guys, thanks for taking my questions. Let’s start first with the [indiscernible]. I think I heard that the planned 100 patient interim analysis is coming at the end of this year fourth quarter of 2015. And if I’m remembering correctly this could influence the primary endpoint for the Phase 3 trial.

Right now it could simple mortality at one year or to be composite of mortality plus some other logical indicators into a composite endpoint.

What in your view would be the best case scenario for the endpoint for the Phase 3 trial?.

Larry, you want to answer that question. .

No matter what overall mortality rate part of the endpoint. I think possibly the most power would be with the simplest endpoint, even a composite with mortality disease for instance would be two highly significant components of a composite endpoint. I think that would be a real great win for the program..

Mark, regarding the news you said something, which is – I don’t think we said that the 100 patients data is matured going to be in the fourth quarter of 2015, we said in the latter half of sometime during 2015. The timing we have not disclosed yet, so it could be soon, just wanted to make sure. .

Thanks for clarifying that. Switching to CyMVectin just for a second, I know you said you’d be hearing more about in the next quarterly update. I’m just wondering if you can tell us anything at all about your potential right size or scope of the trial.

And also are you envisioning anybody responses that are on par with the preclinical data, do you envision continuing development or are you still thinking of potentially partnering the program?.

So, I’ll answer first part of your question in terms of timing. I think second quarter if we have something to report to you sooner obviously we’ll report to you sooner.

In terms of the trial side, the trial side is going to be small time, it’s really a primarily Phase 1 study to safety and I’ll let Larry comment on, particularly on the antibody, what’s the focus of trying to get, what kind of antibody responses we’ll be looking for..

Well hopefully to achieve antibody responses that are in the range of what we would find from naturally infected human syndrome and I think that would be a big win for that program to be able to achieve those antibody trials..

Actually the key thing because antibody, Larry correct me if I’m wrong, are really going to be critical as it relates to protection from these individual based on the new college base that we have in this field..

We believe those antibodies are critical and with the use of a recombinant gB protein does not must – we think our DNA vaccine has a good chance of doing that, so that’s what this trial will demonstrate. .

And again to answer your question, we saw the activity in animal models and really the goal is to replicate that in human. That answers your question..

Now regarding whether or not you’re thinking about this as a – being developed on your own or in partnership, any thoughts on that?.

We can demonstrate based on this small study that indeed we can elicit the kind of response that Larry was referring to, meaning both towards the entry point of fiberblast and the right balance that we saw in the animal models.

That would be creating a paradigm shift, to get a lot of opportunities and the big players are excited about it because all the program so far and particularly if you look at the old scientific program, which is published in The New England Journal of Medicine where they got pretty whopping antibody responses, but they were all directed at turboblast correct, and so the efficacy was pretty low.

So if we can demonstrate that we can involve this dual response to answer the antibody, we could get exciting – some excitement in that side.

Igor, you want to comment on that?.

To get the approval with that would be a significant effort, potentially we will need to partner it.

And again, as Vijay said, if we’re able to replicate in the Phase 1 study the exciting result of this animals that was presented at the CMV conference in Brisbane, the spring we expect that will see significant partnering interest and we’re in touch with all the key players in the field and there is a finite number of them.

And once we get these numbers, we’re hopeful that may give us an opportunity to partner and [indiscernible] program..

And there is really nothing going in, if you go to their pipeline. The CMV, it’s one of the last remaining big commercial targets now, for which there is a reasonable understanding of the biology and protection, so people will jump on it because it’s an adolescent female vaccine..

That’s helpful. Thanks for clarifying. One final question then I can jump back in the queue. Regarding the HSV data releases there are particular conference in December that you’re planning to have that whole data at or it’s just going to just be in the form of a press release..

We haven’t decided, obviously the two big conferences where we have the opportunity. One is just going to come in, which is IDSA and we decided to pass on presenting data at IDSA simply because we won’t have a complete data at this point in time.

Some of our [indiscernible] had suggested that we should do that, but we don’t feel that we will have a complete dataset and particularly with the confronting result, we want to make sure that we get complete for the nine month. So we are not going to be able to go at conference IDSA, but there are a lot of other conferences where we can present it.

In the absence of that if we think then we will announce the topline data in the press release, but thought process hasn’t really been worked out yet..

Okay. Thank you. Thank you very much..

Thank you. That concludes today’s question and answer session. At this time, I would like to turn the conference back over to Mr. Samant for any additional or closing remarks..

Well, thank you all for participating. We look forward to continued progress in our development programs and to meeting with some of you at our upcoming conferences. Thank you..

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