Tony Ramos - VP & CAO Vijay Samant - President and CEO Larry Smith - VP of Vaccine Research Anza Mammen - VP, Clinical Vaccines Andrew Hopkins - Director, Corporate Development and Project Management.

David Bouchey - IFS Securities Shaunak Deepak - 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 that all participants are in a listen-only mode.

At the request of the Company, we will open up the conference up for question and answers from invited participants after the presentation. I would now turn the conference over to Mr. Tony Ramos, Vical’s Vice President & Chief Accounting Officer. Please go ahead, sir..

Hello, everyone. Welcome to our third 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 the 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 the third 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 partner programs are proceeding according to plan and as Tony will report financially we are well positioned to continue the advancement of our development programs. On the call today, Dr.

Larry Smith will discuss our CME collaboration with Astellas, specifically the progress made on the HCT Phase 3 study. Dr. Anza Mammen will discuss our Phase 2 HSV2 therapeutic vaccine study which recently began enrolment.

And finally Andrew Hopkins will provide an update on the progress we have made on our ongoing Phase 1 study to evaluate our antifungal product candidate VL-2397 for which we recently completed dosing. Will begin the call today with financial results - review of financial results by Tony Ramos.

Tony?.

Thank you Vijay. We reported financial results this morning for the third quarter of 2016 which reflect continued progress in our ongoing development activities. Revenues were $2.6 million for the third quarter of 2016 compared with $5 million for the third quarter of 2015.

Our revenues reflect ongoing manufacturing services and development activities performed under our agreement with Astellas related to ASP0113 therapeutic vaccine program. We had a net loss of $2.5 million for the third quarter of 2016 compared with $0.3 million for the third quarter of 2015.

The increase in our net loss compared to the third quarter of 2015 is primarily the result of a $2.3 million decrease in contract revenue associated with the timing of manufacturing services related to the ASP0113 vaccine program.

Our cash burn for the third quarter of 2016 was $3.2 million compared to a net increase in cash of $0.2 million for the third quarter of 2015. We ended the second quarter with $43 million in cash and investments. Our cash burn for the first nine months of 2016 was $6.8 million.

Our cash burn projection remains unchanged for 2016 at between $8 million and $11 million. We believe that our current cast balance will be sufficient to fund our operations through 2018. I will now turn the call over to Dr. Larry Smith..

Thank you, Tony. As you know ASP0113 is our therapeutics CMV vaccine candidate partnered with Astellas that is designed to prevent cytomegalovirus disease and associated complications in HCT recipients. Now just a reminder, ASP0113 is a vaccine not an anti-viral drug.

Let me begin with a few comments on the recently announced topline results from the Phase 2 SOT trial. We were disappointed with the outcome of this proof of concept trial which did not meet the primary efficacy endpoint of CMV viremia at one year. Astellas is reviewing the full dataset and plans to present the data at a future scientific venue.

Astellas has informed us that it is not planning any further studies in SOT recipients. However, it is important to note that Astellas remains fully committed to the HCT program.

We believe that the results of the Phase 2 trial are not predictive of an outcome in the HCT trial because there are fundamental differences between the HCT and the SOT populations. First, in contrast to HCT recipients, who are transiently immunoblotted during the conditioning procedure of the transplant.

SOT recipients are chronically immunosuppressed for life after transplantation in order to prevent organ rejection. Second, CMV seropositive HCT recipients have previously been exposed to CMV in contrast to SOT subjects enrolled in the phase 2 trial who are all CMV seronegative and therefore had no prior immunological exposure to CMV.

Coupled together, inducing CMV specific immune response is from naive T-cell in subjects who have not been exposed to CMV in the context of the continuous intensive immune suppression used in SOT recipients may be a very difficult task for any vaccine.

Finally, proof of concept for controlling CMV viremia in HCT recipients is supported by Vical’s previous phase 2 trial. On contrast, the SOT phase 2 trial was the first time that ASP0113 was tested an SOT recipients. And the trials designed to establish proof of concept in this target population.

Collectively, we believe that the results of phase 2 trial and SOT recipients has no bearing on the probability of success of ASP0113 in HCT recipients. And likewise Astellas believes that the two populations are entirely distinct.

And therefore they remain firmly committed to the HCT program With respect to the HCT Phase 3 trial, we announced in September that the phase 3 trial met its target enrollment of 500 subjects and is now fully enrolled.

You may recall from our previous earnings calls that the primary endpoint of this trial is a composite of overall mortality and CMV end organ disease which will be assessed at one year after transplantation. An independent committee has been appointed to adjudicate all cases of CMV end organ disease and data collection is in progress.

With the trial fully enrolled, there is better visibility on the timing of the final one year assessments in data collection, so Astellas now expects to announce topline data in the first quarter of 2018.

Finally, we'd like to mention that Vical and Astellas continue to make substantial progress in process validation activities for the manufacture of the bulk drug product in preparation for a potential BLA filing in 2018.

We continue to work extensively with our colleagues at Astellas to ensure all of our development objectives are on track for this filing. I will now turn the call over to Dr. Anza Mammen..

Thank you, Larry. In September, we announced the initiation of the Phase 2 trial of our bivalent HSV-2 therapeutic vaccine. This randomized double blind placebo controlled trial evaluate the efficacy and safety of [indiscernible] in approximately 225 otherwise healthy adults aged 18 to 50 years with symptomatic genital HSV-2 infection.

After a four dose vaccination series subjects will be evaluated for recurrences over a 12-month period. Following extensive discussions with the FDA and our clinical experts, we selected annualized recurrence rate at the primary endpoint for the study.

We concluded that recurrence rate is one of the most clinically meaningful endpoints for patients and treating physicians as it provides important information on both the number and spacing of occurrences over time this chronic disease setting.

The Phase 2 trial has been designed based on Phase 1/2 trial results presented at the 2016 American Society for Microbiology Microbe meeting in June that revealed 57% reduction in lesion rate that was statistically significant with the p-value of 0.009 when compared to baseline in the bivalent vaccine arm at nine months along with trends in other secondary endpoints.

In addition, the bivalent vaccine was immunogenic and produced a statistically significant increase in antigen specific interferon gamma producing T-cells. As a reminder, HSV-2 is a sexually transmitted virus which is the leading cause of the current genital herpes.

Approximately 16% of the US population between the ages of 14 and 49 years of age are infected. Over 400 million people are infected worldwide. HSV-2 infections are persistent and can result in painful genital lesions as well as intermittent virus shedding placing sexual partners at risk for acquiring infection.

HSV-2 infection also significantly increases the risk of acquiring the HIV-1 from HIV infected sexual partners. Available anti-viral therapies are underutilized as they require daily compliance and still lead to breakthrough lesion recurrence.

Given that no new antivirals have been approved since the approval of Valtrex in 1995, we feel strongly that therapeutic vaccination has the potential to shift the paradigm in how this chronic emotionally debilitating infection is managed.

We are excited to have 15 academic and private sites with HSV-2 expertise taking part in the trial and we look forward to providing you future updates as our enrollment progresses. A number of patients have contacted us regarding how to enroll in our HSV-2 trial.

I refer them to www.clinicaltrials.gov, where specific contact information is provided for each of our active clinical sites. I will now turn the call over to Andrew Hopkins..

Thank you, Anza. We’re pleased to announce that we completed dosing and all planned cohorts for the Phase 1 clinical trials on novel antifungal agent, VL-2397. As a reminder, VL-2397 was licensed from our partner, Astellas Pharma, in March of 2015.

It is a small molecule compound that was isolated by Astellas from leaf litter fungus in a Malaysian National Park. VL-2397 has a novel mechanism of action that represents a potential new class of therapies to treat life-threatening fungal infections.

The FDA has granted Vical, QIDP, orphan drug and fast track designations to VL-2397 for the treatment of invasive aspergillosis. I’ll now take a moment to summarize the Phase 1 trial design.

This is a randomized double-blind placebo-controlled trial that is intended to evaluate safety, tolerability, pharmacokinetics of single and multiple ascending dose cohorts of VL-2397 administered intravenously in healthy volunteers aged 18 to 55 at a single US clinical site.

Dosing has been completed in the last of 11 cohorts, consisting of 7 single ascending dose cohorts with subjects received a single dose of VL-2397 or placebo, three multiple ascending dose cohorts with subjects with dose for 7 consecutive days and in the final cohort with subjects with dose for 28 consecutive days.

Safety fobs and pharmacokinetic sampling are expected to be completed by the end of 2016 with beta to follow in 2017. In parallel, we are working actively with the FDA and our expert advisers to design a Phase 2 efficacy study in invasive aspergillosis that will generate a rapid proof of concept.

Invasive aspergillosis represents a sizable unmet medical need in immunocompromised patients due to a high mortality rate, despite available antifungal therapies. VL-2397 has the potential to be an efficacious and well tolerated therapy for immunocompromised patients who are susceptible to invasive fungal infections.

I will now turn the call back to Vijay..

Thank you, Andrew. In summary, we believe our strong cash position, coupled with our effective cash management will allow us to continue to advance our clinical programs according to plan. Our management team continues to carefully manage our cash burn. During the first nine months of 2016, we utilized $6.8 million of cash to fund our operations.

We ended the third quarter with $43 million in hand and our 2016 expected burn rate guidance remains unchanged. In September, Astellas met its target enrollment of 500 subjects in its Phase 3 trial for ASP0013 in HCT. Astellas anticipates top line data from the trial will be available in the first quarter of 2018.

Enrollment in our Phase 2 efficacy trial for our bivalent therapeutic vaccine for HSV-2 is underway. This approach could represent a paradigm shift in the management of this chronic and emotionally debilitating infection for which no new anti-viral therapy is in approval over 20 years.

We completed the dosing of our Phase 1 trial for our novel antifungal product candidate. To remind you, this was licensed from Astellas about two years ago.

VL-2397 to valid safety and pharmacokinetics, the remaining trial activities are expected to be completed by the end of 2016 and this has all gone according to plan and the data will follow next 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..

Thank you, Mr. Samant. [Operator Instructions] Our first question comes from David Bouchey of IFS Securities. Please go ahead. Your line is open..

Well, it sounds like you've got a lot of news flow coming up over this year, culminating in a year from now in the Phase 3 results in stem cell transplants, but I'd like to ask a question about the HSV-2 trial, as you got going on in the Phase 2 trial there. You said you have about 15 sites.

Are you going to continue adding more sites to this trial?.

I don't think so. I think just going on experience from the previous study, we had about 7 sites previously and we had about what, Anza, 150 patients. And we're going for about 225 patients. So we have about 15 sites. I think we may drop a site, add a site, but I think the overall number of 15 is not going to change..

Can you give us any guidance on when you might expect the last patient to be enrolled? Do you think it might be sometime around the middle of 2017?.

Well, the trials have started recruiting.

So, it's hard to give you an exact guidance, but if you were to take an example, Anza, remind me what was our experience in our previous Phase 1 study?.

Yeah. In the previous trial, we enrolled approximately 150 subjects in the efficacy portion of the trial and approximately six months with only seven clinical sites. So I believe that with over double the number of sites in this trial that we can do even better..

Yeah. So give us a little time and we'll be able to, but I think this is a fast recruiting study. There are a lot of patients who want to get in this study and the reason, Anza, in the script specifically talked about patients who are calling in here, because we get a lot of calls all the time.

So there's a lot of interest in this particular disease and particularly, this trial, okay, because as Anza reminded you, nothing has been approved, Anza, what last 20 years now, right..

And one quick question for Tony.

Now, the increase in cash that's due to the investment that was made in Vical by Angie’s, is that correct?.

Yes. That’s correct..

Okay, good.

When we should have that?.

Yeah. I think, David, I think as a following analyst, you guys have to look at how we carefully manage our cash.

I mean, we're remarkable in terms of how, we started an HSV-2 study and we haven't changed our guidance and we completed our VL-2397 study a little bit ahead of schedule, okay, because we've done the 28-day dosing, which is really the Achilles heels in all antifungal studies.

Once you've passed that study, I think you’re in great shape to advance to the next phase to programs. Now obviously, we’ll have to analyze the data, but everything has gone so far very well with that study..

[Operator Instructions] We will take our next question from Shaunak Deepak of HC Wainwright. Please go ahead. Your line is open..

Hey, guys. Thanks for taking my question. I just wanted to check in on 2397 and I was curious about the timing for the data readout there. Previously, I thought you guys would have data readout by year end and I was wondering if you're waiting for specific kind of juncture when you present that data to the street..

I think, as Andrew clearly mentioned in his presentation that the final dosing on the 28-day cohort is complete, which is really the proof of concept phase of this particular Phase 1 study. We’ll be now analyzing the data, collecting the PK data, assembling the safety data and the data should be available early next year.

Well, we want to make sure we present it at an appropriate important meeting, because remember, this is a very novel antifungal. There's - nothing has been approved in invasive aspergillosis with the new mechanism for a very long time. So we want to make a little splash, so the data should be available early next year.

We just want to make sure that we find the appropriate venue to present it. So, there's no delay in getting the data out..

Fair enough. And then I understand that you guys are busy working on designing the Phase 2 trial.

I was wondering like when you'd expect to present to the street like a concrete update on some of those design ideas and thoughts that may go into that trial?.

So I think it’s an excellent question. We are working very closely with our key advisors who are invasive aspergillosis experts. We're also working closely with the FDA.

There's a clear understanding both from the perspective of the FDA and our expert advisors that there is a really dire medical need for a new therapy, because the current therapy, AmBisome, is effective, but is extremely toxic and so anything new would be a boon to patients, particularly this patient population.

And our goal is, our dialog with the agency continues and the reason our dialog continues is because we have a QIDP designation and that's an important channel or a new window to communicate with the agency more effectively.

I think we should announce it around the same time we announced the data as soon as - I think we want to - hopefully can couple the announcement of the Phase 1 date and the study design around the same time. So it should happen sometime in the first half of 2016. That's the goal. ‘17, sorry..

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

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 again..