Anthony Ramos - Vice President Finance and Chief Accounting Officer Vijay Samant - President and Chief Executive Officer Larry Smith - Vice President, Vaccine Research Mammen "Anza" Mammen - Vice President, Clinical Vaccines Andrew Hopkins - Director, Corporate Development and Project Management.

Jason McCarthy - Maxim Group David Bouchey - IFS Securities.

Please standby, we are about to begin. 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 up the conference for questions and answers from invited participants after the presentation. I will now turn the conference over to Mr. Tony Ramos, Vical’s Vice President and Chief Accounting Officer. Please go ahead, sir..

Hello, everyone. Welcome to our first quarter 2016 financial results conference call. Joining me on the call today is Vical’s President and Chief Executive Officer, Mr. Vijay Samant; Vical’s Vice President of Vaccine Research, Dr. Larry Smith; Vical’s Vice President, Clinical Vaccines, Dr.

Anza Mammen; and Vical’s Director, Corporate Development and Project Management, Andrew Hopkins. 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.

These statements 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 first quarter 2016 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’d 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. I’m pleased to report that our independent and partnered programs are proceeding according to plan. As Tony will report, we have continued to manage our expenses such that the company is well-positioned to continue applying development efforts. On the call today, Dr.

Larry Smith will discuss our CMV collaboration with Astellas; Dr. Anza Mammen will discuss the status of our HSV-2 therapeutic vaccine program; and finally, Andrew Hopkins will provide an update on our ongoing Phase 1 study to evaluate our antifungal product candidate, VL-2397.

We’ll begin the call today with a review of our financial results by Tony Ramos.

Tony you’re on?.

Thank you, Vijay. We reported financial results this morning for the first quarter of 2016, which reflect our ongoing activities to advance our CMV program licensed to Astellas and initiation of our Phase 1 VL-2397 clinical trial. Revenues were $4.6 million for the first quarter of 2016 compared with the $4.9 million for the first quarter of 2015.

Our revenues reflect manufacturing services and process development activities performed under our contract with Astellas related to the ASP0113 vaccine program. We had a net loss of $2.4 million for the first quarter of 2016, compared with $3.8 million for the first quarter of 2015.

The decrease in our net loss compared to the first quarter of 2015 is primarily the result of $1 million in expense recognized in connection with the in-license of VL-2397 from Astellas in March of 2015. As in prior quarters, we continue to effectively manage our cash burn.

Our cash burn for the first quarter of 2016 was $1.7 million compared to $2.9 million for the first quarter of 2015. We ended the first quarter with $40.3 million in cash and investments. We’re projecting the cash burn of between $8 million and $11 million for 2016. I’ll now turn the call over to Dr. Larry Smith..

Thank you, Tony. ASP0113 is our therapeutic CMV vaccine candidate partnered with Astellas that is designed to prevent cytomegalovirus disease and associated complications in transplant recipients. And just a reminder, ASP0113 is a vaccine, not an antiviral drug. This vaccine is undergoing testing in two major clinical trials.

First one is a global registrational Phase 3 trial in hematopoietic cell transplant recipients, HCT recipients. The second one is a global Phase 2 trial in solid organ transplant recipients, SOT recipients. With regards to the Phase 3 HCT trial, this is a large global trial that is designed to enroll a total of 500 CMV seropositive HCT recipients.

Enrollment is ongoing at over 80 clinical sites among 11 countries in North America, Europe, Australia, and Asia. Trial recruitment is proceeding according to plan and we have exceeded 80% enrollment into the trial. Astellas expect to complete enrollment on schedule in the third quarter 2016.

You will recall from our previous earnings call that the primary endpoint of this trial is composite of overall mortality in CMV and organ disease. As a reminder, the Phase 2 results were published in Lancet Infectious Diseases, 2012.

While we’re on the subject of these clinically evolved in endpoints, I’d like to briefly mention the 2016 publication and Lancet hematology by Dr. Maggie Green and colleagues at Fred Hutchinson Cancer Research Center. You can find these publication posted on our website.

They published a retrospective cohort study from over 900 subjects undergoing HCT at their center between the years 2007 and 2013. They concluded that CMV viremia is associated with not only an increased risk of CMV and organ disease, but also an increased risk of overall mortality in the first year after transplant.

We believe this provides strong support for the association between CMV viral load for organ transplant patients and the risk of developing clinically significant outcomes including CMV end organ disease and death. These are the primary end point events we are measuring in our Phase 3 study.

In addition to the substantial progress on the clinical front, we’d like to mention that Vical has initiated process validation activities for the manufacture of all drug products in preparation for a potential BLA filing in 2018.

We continue to work extensively with our colleagues Astellas to ensure all of our manufacturing objectives were on track for the filing. With regards to the Phase 2 SOT trial, 150 subjects were fully enrolled in May of 2015, and will therefore complete the planned one-year follow-up later this month.

This trial enrolled high-risk subjects, CMV seronegative recipients receiving a kidney from a CMV seropositive donor, at 80 centers in the U.S., Europe, and Australia. A D+/R- group has an approximately 50% risk of developing CMV viremia, and about a 35% risk of developing CMV disease within the first one year of transplant.

A Phase 2 trial is powered to show an approximately 50% decrease in the CMV viremia at one year. Viremia is seeing measured, while a PCR assay conducted as central laboratories. Astellas expects top line data released in the third quarter of 2016. I would now turn the call over to Dr. Anza Mammen..

Thank you, Larry. We’ve completed our Phase 1/2 study of our HSV-2 Therapeutic Vaccine. As previously reported, when measuring lesion rate, a clinically relevant endpoint, the bivalent vaccines elicited a reduction at both three and nine months at the completion of the vaccination theory.

The 57% reduction in lesion rate absorbed at nine months, but statistically significant, neither the monovalent vaccine nor the placebo elicited in statistically significant reduction at 9%.

Furthermore, our T-cell immunogenicity data demonstrated statistically significant raises in UL46 specific interferon gamma producing T cells in our bivalent vaccine recipient.

We will be presenting data on multiple safety and efficacy endpoints from the Phase 1/2 trial in an oral late-breaker presentation at the American Society of Microbiology, Microbe/ICAAC conference on June 20 of this year. Our abstract stays that while a reduction in shedding was not absorbed in three months.

The bivalent DNA vaccine elicited a sustained and statistically significant reduction in lesion rate at three and nine months in person with genital herpes.

Our decision on weather depends up to Phase 2 trial for further evaluate the bivalent vaccine, while we based on the strength of the data, the recommendation of our clinical advisory board and the out come of ongoing discussion with FDA, regarding potential end points for a Phase 2 trailers.

Once all of this information is known, we will be in a better position to assess the potential benefit of further development and to identify the resources needed to complete the study. Remember, we are also conducting a Phase 1 study of our antifungal product candidate, VL-2397, which we planned to quickly take to Phase 2 study.

So we will need to consider our cash position and resources necessary, if we are to conduct both trials simultaneously. I will now turn the call over to Andrew Hopkins..

Thank you, Anza.

As we announced in March, Vical initiated a Phase 1 clinical trial by novel antifungal agent VL-2397, which randomized, double-blind, placebo-controlled trial is intended to evaluate safety, tolerability and pharmacokinetics with single and multiple ascending those cohorts of VL-2397 and healthy voluntaries, aged 18 to 55 at a single U.S.

clinical site. The files on track and as expected to be complete in the fourth quarter of 2016. The pharmacokinetics now is to the Phase 1 study, thinking after that is an independent GOP complaint, contract research laboratory.

As a reminder, antifungal activity in animal models to feed as well efficiency in humans to appropriate drug levels can be achieved. In invasive aspergillosis animal models of infection, VL-2397 has demonstrated high survival rates and reduced fungal bread in the lungs have infected much.

Looking ahead, we continue to work closely with core team of expert advisors to design a proof-of-concept efficacy study for VL-2397 in the treatment of patients with invasive aspergillosis. This invasive fungal infection is associated with the high mortality rate in immunocompromised patients underscoring the need for new antifungal therapies.

As you will recall, VL-2397 was licensed from Astellas Pharma in March 2015, is a small molecule compound that was isolated by Astellas from leaf litter fungus in a Malaysian National Park. VL-2397 was a novel mechanism of action, that represents a potential new class of therapies to treat life-threatening fungal infections.

The FDA has gone to find out a qualified infectious disease products or QIDPs designation, orphan drug designation, and most recently Fast Track designation to VL-2397 for the treatment of invasive aspergillosis. I’ll now turn the call back to Vijay..

Thank you, Andrew. In summary, we believe our strong cash position and our projected low burn rate will allow us to continue to advance our clinical programs according to plan. We continue to effectively manage our cash burn ending the first quarter with $40.3 million of projected cash burn guidance for 2016 is between $8 million and $11 million.

As Larry mentioned, Astellas is expected to complete patient enrollment in its Phase 3 trial of ASP0113 in HCT recipients in the third quarter of 2016. Astellas anticipates that the top line data from the trial will be available in the fourth quarter of 2017. ASP0113 in sold organ transplant recipients is fully enrolled.

Astellas currently expects the data to be available in the third quarter of 2016. We look forward to presenting the additional efficacy data of our completed HSV-2 Phase 1/2 clinical trial at exact [ph] in conference in June in Boston.

The Phase 1 trial for a novel antifungal product candidate VL-2397 to evaluate safety and pharmacokinetics is ongoing and we expect this trial to be completed by the end of this year. This concludes our prepared comments for today. Operator, we’re now ready to open the call for questions from our invited participants..

Thank you, Mr. Samant. The question-and-answer session will begin at this time. [Operator Instructions] Please standby for your first question. We’ll take our first question from Jason McCarthy with Maxim Group..

Hi, guys, congratulations. It sounds like things are still continuing to move well. And kind of, I’ve got a lean right as far as the antifungal work. And I was wondering, I know you have QIDP status and your Phase 1goes underway. How do you see this program unfolding as you go forward in terms of the path towards approval. Aspergillosis is complicated.

It’s this – if you have a bone marrow transplant or or solid organ transplant or chemotherapy pathogenesis from the lung pathology of very, very different. So would you kind of walk us through what you see the path forward gain, which is select for specific populations of patients.

Are you going to need to define the mechanism of action to help you define the pathway way forward? Can you just kind of help me make that a little bit more clear?.

First of all, I’ll pass the question on to Andrew, but before I pass it on to Andrew, I think there’s a huge unmet need in aspergillosis, okay. Invasive aspergillosis mortality is very high 50%. So there are variety of patient populations that we can go on to.

But Andrew can explain to you specifically what our thought process here is okay?.

Right. Thank you, Vijay, and thanks for the question Jason. First off, obviously the first thing for us to do here is to complete the Phase 1, that’s going to really give us some answers that we’re looking for as far as safety and pharmacokinetics profile from VL-2397.

And once we’ve got that data in hand, we’re looking to very quickly evidence a study in invasive aspergillosis. And as we mentioned before, we’re working with the top express in the field on helping to figure out what this specific design is for that.

And we’re not at a point where we’re ready to disclose that right now, but we will keep you updated as we near the end of the Phase 1..

But really the goal here is to target a specific patient population where nothing works right now. The current standard of care therapy AmBisome, where the toxicity is very high, and see whether we can come with efficacy indicators, which are better than the current stand of care in AML patients for example, just as an example.

And see whether we – if we have a – you can demonstrate safety profile, this will be a new modality nothing is being approved in this patient population for treating aspergillosis of the superior profile in the last 20 years, okay, even the recently approved Astellas antifungal is just a basically a meeting drug like Vical..

Great, and I remember we had discussed this previously, where is this connection to therefore is in iron and I’m wondering if you’re working internally on the balance sheet you’re group is working on the balance sheet, to find the mechanism of ASH and preclinically and maybe essence of timing on when we might see something from that, because once you do have the MOA it is a new compound very high unmet medical need.

It will be interesting, you can really point at that part as well, the other sense of when or what that work, which is going to impel?.

Larry, you want to answer. We’re working with the whole bunch of academic centers, but one particular academic center we are planning to work on Larry..

We’re just initiating collaboration to give exactly that is better defined exactly of this drug works in Astellas. And so iron is absolutely an essential component for this infection, other fungal infection procedure required, and as far as very most mechanism.

And so having – so therefore that associated with the iron metabolism of the fungal cells is really up and incredibly unique opportunity to get up these infections right up the heart of vital component of its life.

So we’re – we’ve recognized that we need to kind of flush this out to more detail and we have began collaborations that we’ll announce once we get some more data on it. But there are several components to that we want to identify the intracellular mechanism for instance of how this is working.

We understand, we know that it proceeds through a siderophore iron transporter-1 or SIT-1 to access the fungal cells, but there is more within that. And so when we’re added moving forward to identify exactly what those steps our competitors used today the mechanism of action..

Yes, just to add to what Larry said for the audience you see therefore the aspergillus in particular has to survive and requires iron for survive when the force of vehicle have been send out to gather iron from the body and suck it in they extract that old stock like, while these people needed sodium chloride to survive that’s exactly what it is.

And whole idea is if you start the anti-fungal of iron then this fungus dies okay.

So that that’s the whole concept, and as the VL-2397 is limits the seropositive to have the ability to enter the fungal along with the aluminum on top attached to it probably kills the fungus that’s what the theoretical purposes of how the anti-fungal works, but I think that really needs to be validated, but it’s a fascinating mechanism if it is validated..

Okay, great guys, thanks a lot and we’re looking forward to seeing some progress in all your programs including this one. Thank you..

Thanks David..

[Operator Instructions] We’ll now go to David Bouchey with FS Securities..

Hi, guys congratulations on your quarter. I just have a couple of quick questions focusing on the herpes simplex 2 vaccine and looking at your data in terms of activated T cells recognizing glycoprotein D and UL46. Now the data that you presented looks at days measurement a day 3, 5 a day, 63 which is good data.

I’m wondering what are the time points are you measuring this data at what we’ll be seeing some updates later on in the year?.

Sure, David. This is Larry, yes indeed. We’re looking at later time points. We’re looking at day 150 and day 330, so that we can better understand the magnitude of those responses over time. And we’re actually in the process now of doing those studies.

And so once we have conceded them we’ll provide an update, but those are the two related time points that we’re looking at day 150 day 330..

That data by the way will not be presented as they got meeting because those – that – those measurements are being conducted right now – being conducted now. So it will be in time for that June presentation, but it will come after that..

But we believe based on our prior experience with DNA vaccines that there should be a stand stable response. If you look at our influenza data from H5 study, we had a pretty stable response almost six months, okay. So I think this should be – this should bare out if it parallels our influenza experience, the data should pan out in the same way..

Okay. That’s a great answer. You mentioned – so you were talking about the FDA in very early stages of discussions about what an approval endpoint might be from their point of view.

Are they giving you any indication into whether they want a one-year trial, or do you think they might want a two-year trial? And if they do want a two-year trial to show a sustained benefit, are you going to do a second round of that themes in second year?.

Well, the length of the trial really, David, depends on the endpoint that you choose, okay. If you use, for example, time to recurrence of the endpoint then the duration of the trial is short. If you, indeed, on the other hand use the recurrent straight at the endpoint of the study, the duration is longer. So there are variety of ways you can look at.

So it’s really the duration of the call depends on the primary endpoint. But you’re going to the question of whether we need a booster, I don’t think that our goal of this study would be to evaluate the need for a booster.

I think we believe that the vaccination regime that we have to be sufficient Larry, based on our immunogenicity data that Larry just discussed to give us the desired efficacy during the entire duration period. And we expect to have a follow-up period of about nine to 12 months at most, okay..

Oh, that’s great. Thank you..

If there are no further questions, I will now turn the call back over to Mr. Vijay Samant..

Thank you all for participating. We look forward to continued progress and on development programs and to meeting some of you at our coming conferences. Thank you again..

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