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.

Ram Selvaraju - Rodman and Renshaw. David Bouchey - IFS Securities.

Good day, ladies and gentlemen. And welcome to the Vical Q1 Earnings 2017 Conference Call. At this time, I would like to inform you that this conference call 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 like to turn the conference over to Mr. Tony Ramos, Vical’s Vice President & Chief Accounting Officer. Please go ahead, sir..

Hello, everyone. Welcome to our first quarter 2017 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 its first quarter 2017 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. I'm pleased to that all programs are proceeding according to plan. And as Tony will report financially, we are well positioned to continue the advancement of our key internal development programs in 2017. On the call today, Dr.

Larry Smith will discuss our ASP0113 collaboration with Astellas, speaking specifically to the trial endpoints and the timing of the Phase 3 trial top line results. Dr. Anza Mammen will discuss our ongoing HSV2 Phase 2 which recently completed enrollment of 261 patients. And finally Andrew Hopkins will provide an update on our antifungal program.

We are currently working with our clinical experts and the FDA to begin a Phase 2 study to evaluate VL-2397 in the treatment of patients with invasive aspergillosis in the fourth quarter of 2017.

I just wanted to remind everyone that a replay of our R&D Day for May 2 is available on our website, where you can get an in-depth review of our program including commentaries from outside experts. We'll begin the call today with the review of financial results by Tony Ramos. Tony, you are on. .

Thank you, Vijay. We reported financial results this morning for the first quarter of 2017 which reflect continued progress in our ongoing development activities.

Revenues were $3.2 million for the first quarter of 2017 which were primarily comprised of development activities performed under our agreement with Astellas related to the ASP0113 therapeutic vaccine program that compares to revenues of $4.6 million for the first quarter of 2016.

Revenue for 2016 included $1.2 million of manufacturing service revenue related to our ASP0113 program. We had a net loss of $2.8 million for the first quarter of 2017 compared with $2.4 million for the first quarter 2016.

Our cash burn for the first quarter of 2017 was $1.8 million compared to a net cash burn of $1.7 million for the first quarter of 2016. This is consistent with our full year cash burn guidance of between $8 million and $11 million for 2017. We ended the first quarter with $39.2 million in cash and investments.

We believe that our current cash balance will be sufficient to fund our operations at least through 2018. I'll 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's designed to prevent CMV disease and associated complications in HCT recipients. ASP0113 is the fist CMV vaccine to undergo testing in a pivotal Phase 3 trial, which completed enrollment of a total 515 subjects in September of 2016.

I am pleased to report that the final doses were administered in April of 2017 and all subjects should complete their one year follow up by September 2017. The global Phase 3 trial recruited subjects at over 70 clinical sites and 11 countries in North America, Europe and Asia.

And you may recall that the primary end point of this trial is a composite of overall mortality in CMV end organ disease 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. Astellas anticipates releasing top line results in 1Q, 2018.

And we believe ASP0113 is a first in class treatment for CMV and HCT recipients that offers the ability to harness the immune system to control CMV. Unlike an antiviral drug which is active while it has been taken, therapeutic vaccine has a potential to invoke hematological memory.

This may allow a sustained long-term protection against CMV and decrease the risk of the late CMV reactivation and overall mortality associated with CMV. Finally, we continue to work extensively with our colleagues at Astellas on CMC activities.

I am pleased to announce that we completed the process validation activities for the ASP0113 drug substance and we have now initiated the validation of the drug product process. Astellas has targeted a BLA filing in 2018. I'll now turn the call over to Dr. Anza Mammen..

Thank you, Larry. Vical has developed an HSV-2 therapeutic vaccine designed to reduce lesion recurrences in patients with symptomatic genital HSV-2 infection. The vaccine VCL-HB01 is formulated with Vaxfectin and encode full length HSV-2 antigen gD and UL46 selected through our collaboration with the University of Washington.

We are currently conducting a Phase 2 trial in healthy adult subjects, 18 to 50 years of age who are randomized 2 to 1 to receive either vaccine or placebo to evaluate the efficacy and safety of the vaccine.

The primary endpoint of the trial is annualized lesion recurrence rate which is a clinically meaningful endpoint for both patients and treating physicians as it provides important information on the number of recurrences over time in this chronic disease setting.

The ongoing Phase 2 trial has been designed based on results from a previous Phase 1/2 trial that is presented at the 2016 American Society of Microbiology Microbe.

That analysis revealed a 57% reduction in lesion rate that was statistically significant with the p value of 0.009 compared to baseline in the VCL-HB01 vaccine arm at nine months, along with trends in other secondary end points.

In addition, the VCL-HB01 vaccine was immunogenic producing a statistically significant increase antigen specific interferon gamma producing T-cell. The Phase 2 trial was initiated in September of last year and I am pleased to report that enrollment has been completed as of last month with the total of 261 subjects enrolled at 15 US clinical sites.

I'd like to point out that we experienced a huge surge in interest from potential subjects towards the end of the enrollment period. This is a testament not only to our outstanding clinical sites that have worked tirelessly to identify eligible subjects. But also to the interest that patients have expressed in participating in our trial.

We expect that all vaccination will be completed by this July. Following the four dose vaccination series, subjects enter a 12 months surveillance period during which they record daily in their electronic diary whether they have lesions or not.

If they experience any recurrence, the subjects are evaluated by the investigator in the clinic with 48 hours of the onset of the recurrence. This way the investigator can verify the recurrence both clinically and virologically, removing some of the subjectivity attributed to subject's self recording their recurrences.

Once the last subject is completed nine months of follow up, the primary analysis will be conducted. We expect the release of top line data during the second quarter of 2018. I'd like to point out a number of improvements to the Phase 2 trial design from our experiences with the previous trial.

Firstly, we added a fourth dose to the vaccination series in order to further maximize the immunologic responses in this trial. Secondly, we selected annualized recurrence rate as the primary end point in this trial after consultation with our advisors and the FDA.

Given that annualized recurrence rate is potentially clinically meaningful registration end point. Furthermore, each recurrence that applies to the primary end point will be both clinically and virologically confirmed in the clinic, enhancing the accuracy of the end point analysis by again reducing the subjectivity in subject reported recurrence.

Thirdly, important data is collected using an electronic diary instead of a paper diary. So that subjects can conveniently enter data online without being able to enter catch up or potentially erroneous entry to a paper diary immediately prior to a clinic visit.

And finally, in contrast to the earlier crossover study design, the Phase 2 trial compares our VCL-HB01 vaccine in parallel with the large placebo group, alleviating the concern of biological variability within each subject.

We feel that these important changes have helped to optimize the trial execution and will in turn maximize the likelihood of success. Again, we expect top line results to be available during the second quarter of 2018. I'll now turn the call over to Andrew Hopkins..

Thank you, Anza. As Vijay stated at the beginning of the call, we are on track to initiate a Phase 2 efficacy study to evaluate VL-2397 in the treatment of patients with invasive aspergillosis in the fourth quarter of 2017. We are working with our clinical experts and FDA towards this objective.

As a reminder, FDA has granted Vical QIDP Orphan Drug and Fast Track designations to VL-2397 for the treatment of invasive aspergillosis. Under the QIDP designation, we have been able to interact intensively with the FDA on the design of the Phase 2 trial and we are exploring an expedited development pathway for VL-2397.

We intend to keep investors apprised of our progress on this front. We are also pleased to note that VL-2397 will be featured in four poster presentations and an oral presentation at the June ASM Microbe meeting in New Orleans. The all presentation to be delivered by Dr.

Sean Sullivan who provides a summary of the clinical and non-clinical development of VL-2397 to date. The posters will include a presentation by Dr.

Anza Mammen on the safety and pharmacokinetics from the Phase 1 study, a summary by Laura Kovanda from Astellas Pharma and the University of Liverpool on a population pharmacokinetic analysis from the Phase 1 study and evaluation by Dr.

Sean Sullivan on a limited potential drug interactions of VL-2397 and finally a review of an NIH sponsored in vivo study by Dr. Nathan Wiederhold from the University of Texas, Health Science Center, St. Antonio that investigated the effective VL-2397 to treat wild type and drug-resistant Candida glabrata.

Now to briefly review the completed Phase 1 clinical trial, this was a randomized double- blind placebo controlled study designed to evaluate safety, tolerability and pharmacokinetics of single and multiple ascending doses of intravenous VL-2397 in 96 healthy volunteers.

The results point to a favorable safety and pharmacokinetics profile as we will describe in more detail at ASM June. Invasive aspergillosis represents a sizable unmet medical need in immuno compromised patients due to a high mortality rate despite available antifungal therapies.

Patient populations at risk include those with AML and ALL and allogeneic HCT recipients. VL-2397 has a potential to be an effective and well tolerated therapy in these and other immuno compromised patients who are susceptible to invasive fungal infections. I'll now turn the call back to Vijay. .

Thank you, Andrew. In summary, we continue to make excellent progress on all our development programs. We believe that we are well positioned to continue to advance our clinical programs according to plan. Our management team's primary focus is to advance our clinical program and to manage our cash burn.

We burned $1.8 million during the first quarter to fund our operations which was consistent with our full year guidance of cash burn of $8 million to $11 million. We ended the first quarter with $39.2 million and we believe our current cash balance would be sufficient to fund our operations at least through 2018.

I'm pleased with the continued progress on the ASP0113 program. Astellas completed enrollment and are about seven months into the study's one year follow up period. Astellas anticipate that the top line data from the trial will be available in the first quarter of 2018.

In April, we announced that we had met the target enrollment in our HSV-2 Phase 2 efficacy trial and we expect top line data to be announced in the second quarter of 2018. The first in human Phase 1 trial of novel antifungal VL-2397 in 96 subjects has been completed.

And preliminary results point to a favorable safety and pharmacokinetics profile for VL-2397. The data set would be presented at the ASM conference in New Orleans. We are exploring an expedited development pathway for VL-2397 and our plan is to initiate a Phase 2 efficacy study in the fourth quarter of 2017.

This is an exciting time at Vical given the amount of late stage clinical data that we expect to disclose within next 12 months. This concludes our prepared statements for today. Operator, we are not ready to open the call to questions from our invited participants. .

[Operator Instructions] I'd like now to go to first question from Ram Selvaraju with Rodman and Renshaw. Please go ahead. .

Hi, thanks very much for taking my questions. Can you hear me? Okay, these are relatively straightforward.

Firstly, could comment on the kind of filing process that you expect to be followed for ASP0113? Is this going to be rolling BLA or not? If it's rolling BLA, with what kind of sequence do you expect seconds of the BLA to be submitted? And do you anticipate that an advisory panel will be required for this agent? And if so what might be a content of such panel discussions with particular emphasis on what the panel discussion might be regarding the primary end point? And then with respect to financial, just some housekeeping things, when do you anticipate the 10-Q to be filed? And what was stock based compensation during the quarter? And then finally just a quick question on 2397.

What might an expedited development pathway which I believe is the language used in your press release from this morning look like for 2397? Thank you. .

You asked a lot of questions I need to now make sure I memorize them. So let go through the questions in the orders I remember and if I miss something correct me. Your first question was is it going to be rolling BLA or is it going to be standard BLA filing? I think at the present time Astellas is not indicated to us that it will be rolling BLA.

But this could obviously change. I think this going to be a standard filing. We expect around 12 months response from the agency. The agency will look at the data and decide on the strength of the data. Whether they want to have an AdCom or not.

In most vaccine, approval to my knowledge and having being involved in few of them such as in my Merck days at Hepatitis C Varicella and Comvax and others, the agency normally does for vaccine call an AdCom meeting. So I wouldn't be surprised that they won't call an AdCom meeting in this case.

And at the AdCom meetings they will generally look at primarily first thing for vaccine to safety.

Is the vaccine safe? The second thing is whether its applications and the end points are clinically meaningful and that's really going to be the focus and it will be a mix of significant experts who are CMV expertise and there will be general vaccine experts in that field of that AdCom composition but it's hard to speculate who will be on those committee at this stage.

Does that answer your questions?.

Yes, no, that's very, very helpful..

What else did you have on ASP0113, did I miss before --.

No, with 0113 those were the only questions. .

Okay. In the next question you had was the 10-Q, the 10-Q filing, Tony when will that be..

We will file that this afternoon after the call probably around 11 o'clock. And the stock comp for the quarter was about $200,000. .

Do you expect that to stay constant in subsequent quarters?.

I'd think so. It depends on where the stock price is. But yes it would probably right around $200,000. But I'll take a look at that. .

Okay. Thank you. And then just maybe the expedited development pathway. Maybe you can give us some color on what that mean. .

Well, the expedited -- there are variety of pathways that we are exploring with the agency. One is well a proof of concept can give us an ability to commercialize this product on a small defined clinical trial.

Or we can get an agreement with the agency on the size of two clinical trials that will be required for full approval, a priority, not on the outcome of the first trial results or can we go with an adoptive trial design which will allow us to look at the first set of data and see hey the data looks really good and then rapidly execute on the remaining portion of the study.

So different pathways are available. I think our discussions are in a flux right now. They are not been finalized. Hopefully in the next two or three months will be in a firm footing to tell you exactly what the agency and we agreed on. .

And we will take our next question from David Bouchey with IFS Securities. Please go ahead. .

Hi, guys. Thanks again by the way for putting on the Analyst and Investor Day on the 2nd. That was really well done. I just have a couple quick housekeeping questions.

And the first is your restricted cash, is that going to be about the same as it was for the end of December?.

Yes. The restricted cash will be the same amount until later in the year around July-August timeframe and then it will drop..

All right.

And last, do you have anything new going in your relationships with AnGes?.

I think as we -- I think we didn't put our press release but AnGes put a press release out that we are working collaboratively on a Hepatitis B program which is in a preclinical stage. We haven't made a big deal about it yet because until we get some good preclinical data it would be premature to talk about it.

But we are very active in a collaboration where they are contributing some expertise and we are contributing an expertise. It is Hepatitis B approach towards a therapeutic modality okay that's I'd say at this stage. .

And there are no further questions. I'd like to turn the conference back over to Vijay for any additional remarks. Please go ahead. .

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 very much. .

And once again this concludes today's presentation. We thank you all for your participation. And you may now disconnect..