Vijay Samant - ChiefExec. Officer, Pres Jill Church - ChiefFinancial Officer, Principal Accounting Officer, VP and Sec. Allan Engbring - Executive Director of Investor Relations

Allan Carr – Needham Eric Schmidt – Cowen and Company Navdeep Jaikaria – Rodman & Renshaw Llc. David Schwimmer – GoldmanSachs Brian McCarthy – Merriman CurhanFord

Welcome ladies and gentlemen to the Vical IncorporatedFinancial Results Conference Call. At this time, I would like to inform you that thisconference is being recorded and that all participants are in Listen Onlymode. At the request of the company, wewill open the conference up for questions and answers from the invitedparticipants after the presentation. I will now turn the conference over to Mr. Allan Engbring,Executive Director of Investor Relations. Please go ahead, Sir.

Welcome to our Fourth Quarter and Full Year 2007 FinancialResults Conference Call. Participating on the call today are Vijay Samant, ourPresident and Chief Executive Officer, and Ms. Jill Church, our Chief FinancialOfficer. I will begin with a brief notice concerning projections andforecast. This call includesforward-looking statements including financial expectations and projections ofprogress in our research and development programs that are subject to risk anduncertainties that could cause actual results to differ materially from thoseprojected including the risk set forth in Vical’s annual report on Form 10-Kand quarterly reports on form 10-Q filed with the Security and ExchangeCommission, as well as the specific risks and uncertainties noted in Vical’snews release and 2007 financial results. These forward-looking statements represents the company’sjudgment as of today. The companydisclaims, however, any intent or obligation to update these forward-lookingstatements. Now, I would like to introduce Vical’s President and ChiefExecutive Officer, Mr. Vijay Samant.

Welcome everyone. 2007was a year of successful execution for Vical representing solid progress acrossall of our programs, both independent and partners. We started the year with some aggressivegoals and have ended the year with a long list of accomplishments and I want totake some time to go through doors in the beginning of the call and I willelaborate on each of those programs later on in the call after Jill finishesour financial reviews. In our Allovectin-7 program, we started up pivotal Phase- 3trial and have opened 40 centers across the United States. In our Phase-2 CMV vaccine trial, wesuccessfully overcame the initial slow enrollment issue. We successfully overcame the initial slow enrollment issueby amending the protocol. Enrollmentrates have peaked up and we are now past the halfway point of this trial. This is an important milestone for us. In our pandemic influence of vaccine program,we completed our preclinical testing, successfully filed an I&D, andstarted our hundred subject Phase-1 trial with both needle and syringe free,needle-free device and we are vaccinating subject at the final 1 mg dose level. Our Vaxfectin Adjuvant demonstrated both immunogenicityboosting and boosting and dose-sparing potential with DNA vaccines andconventional vaccines in animal study. And so far, has tested well up to the 1 mg dose in initial humanapplication in our influenza trial. We also received a $6 billion brand which is not aproduct-specific brand, or scale-up of our rapid response DNA vaccinemanufacturing platform. This conceptwill allow us to prove that we can make large quantities of vaccine in a veryshort period of time. I am talkingseveral hundred thousand doses in a day. Highlights in 2007’s small factors include first, theconditional approval of Merial canine melanomavaccine. This is the firsttherapeutic vaccine approved in humans or animals anywhere in the world so itis a big accomplishment both for a platform on the field of vaccine in general. This vaccine has been volatile in the market and it isslowly advancing towards full approval which we expect some time in the secondor third quarter of this year. AnGes, our partner in Japan, which is actually funding our Allovectin7 trial and also, I would like to see an angiogenesis, has reached the efficacyendpoints after enrolling only 1/3 of the patients of its pivotal Phase-3angiogenesis. Remember, it was 120 patientsstudy. They stopped the study at 40patients because the data look good and they are going to file on the basis of40 patients and we expect that filing to occur some time in the second quarterof this year. Our other angiogenesis partners, Sanofi-Aventis, initiatedits pivotal Phase-3 trial in about 500 patients which is designed to supportapproval in major global markets. I will provide updates in each of these programs as we gothrough our conference call but before doing that, I would want to pass on toJill Church, CFO, to review our 2007 financial highlights.

Earlier today, we reported 2007 results which reflected thesignificant progress in all of our clinical stage development program includingour Phase-3 trial of Allovectin-7 and patients with advanced metastaticmelanoma, our Phase 2 trial of our CMV vaccine and stem-cell transplantrecipient and our Phase-1 trial of our pandemic influenza vaccine and healthyvolunteers. Reported results for the year were consistent with ourexpectations with both the net loss and the net cash burn following withintheir projected ranges. We ended the year with $71 million in cash which issufficient for our anticipated needs through at least 2009. For 2008, we are projecting a net loss in the same range asfor 2007 between $32 million and $37 million, and an effective cash burnbetween $27 million and $32 million, including the cash payments and equityinvestments anticipated from AnGes in support of our Phase-3 clinical trial. I will not turn the call back to Vijay, who will provide anupdate on our key development program.

I will start with Allovectin 7, oncology program, which isin Phase- 3 pivotal trial for metastatic melanoma. As noted earlier today by Jill, we received a$2.1 million payment in late December from our funding partners AnGesMG,reflecting progress in the trial by continuing recruitment of patients at siteacross the United States,and we are actively expanding to sites in Canadaand Europe that should further accelerate ourprogress. We anticipate completion ofenrollment by mid 2009. A brief reminder about the design of this trial, we call itthe AIMM trial, which is designed to support approval of Allovectin-7 as afirst line therapy to prevent metastatic melanoma, the primary efficacyendpoint in the AIMM trial which we negotiated the FDX with the SPE process asobjective response at a 24 week or more after animalization. So, it is clear that response rate is theendpoint. Survival as not the endpointaccepted response rate of the target market for survival. I think you would say it is an importantacceptance. The same point should highlight the durable nature ofresponses to immunotherapy compared with the typically more rapid but more eitherresponses in chemotherapy. Allovectin-7is patient-friendly and is delivered in an outpatient basis with nopretreatment of post-frequent medication in our high-dose Phase- 2 trial,Allovectin-7 had no grade 3 or 4 drug related in worse event, and none of thepatients were seeing the treatment dropped out of the trial for tolerabilityreasons. The two kindly-approved first line treatments frommetastatic melanoma have reported drug-related serious and worse events as highas 50%. If we are successful in ourclinical effort, we believe Allovactine 7 could become a well-acceptedtreatment or alternative for the metastatic melanoma market. Angiogenesis, which is really a big value drive for thecompany, and we have two partner programs. I will focus truly on both those programs. They really offered the nearestcommercialization opportunities or a human application of our technology. Our two partners in the field of angiogenesis are AnGes MGand Sanofi-Aventis. One is a smallJapanese high-tech company in Japan,not really small as the market gap close to a billion dollar, andSanofi-aventis is a big pharma and the initial application for both of them isindeed Peripheral Arterial Disease or PAD. Last summer, as I mentioned earlier, AnGes stopped their Phase-3PAD trial after meeting the primary endpoints in an interim analysis. Those endpoints improvements in painaddressed introduction in this chemical society at 12 weeks after dosingdemonstrated statistically significant improvement in the treatment groupcompared with the placebo. AnGes is currently preparing the filing for marketingapproval in Japanthis year. Our second angiogenesispartner, Sanofi-Aventis is conducting a 500-patient multinational Phase-3clinical trial. I think it is conductingabout close to 35 or 40 countries, if I am not mistaken. The primary efficacy endpoint of this trial is introductionof the need for amputation in patients who are seeking treatment compared tothose receiving placebo. This endpoint was a direct result of observed reduction andamputation rates in the previously computed Phase-2 trial, which bent astatistical endpoint. Assuming successful completion of the trial, Sanofi-aventisexpects to file from marketing approval in 2010. The angiogenesis market is potentially one of the largestmarkets for our technology and certainly offers the nearest opportunity forhuman application. From their initial focus on PAD, both Angius and Sanofi-aventisprograms could expand to early stage diseases, as these treatments gainedmarket acceptance. They may also prove complimentary. Again this has to be tested if used incombination. Since they rely oncompletely different growth factors, remember, AnGes is using parasite growthfactor and Sanofi is using FGF 1. So themechanisms for Angiogenesis are slightly different. However, both are delivered by the Vical bloodDNA technology. All programs shouldgenerate milestone payment as they continue to advance through development andif approved could generate substantial royalties to Vical. These are among our most exciting need andvalued drivers and we will continue to monitor their progress closely and keepyou advanced. Our CMV vaccine development program which is in Phase-2study, as you know it is being tested in the (inaudible) stem cell transplantpatients or bone marrow transplantations, as you may recall, on October anindependent data safety monitoring board recommended continuation of ourPhase-2 trial based on interim safety data for the first 20 stem cell transplantrecipients. Now, it is very important,these are really sick patients, so safety is a very important determination ofthis trial. So this is not a casualsafety load. Going back again to the CMV program, the rate of enrolmentof this trial has increased nicely since we opened the new online vaccinationin recipients only. In fact, therecipient only has dominated on your enrolment and we are now past the 50%enrolment stage. Our goal is to have 80recipients in this trial. As a result,we have decided to phase out the donor recipient because it is creatingconfusion the cleric and we are not getting too many patients of that. And concentrate all our enrolment efforts onthe recipient only. With the enrolments not past the halfway point towards thegoal taking these recipients, we are now on schedule to complete an interimdata analysis in the second half of 2008. So what is the symptom analysis going to show us? It is going to compare a vaccine versusplacebo groups using multiple efficacy markers and I am going to raise three ofthem for you today. First is the frequency of viral reactivation. Second is the total anti-viral therapy usedbetween both groups and three, the most important one is the viral load and ofcourse we will compare safety between both groups. And the data from this interim efficacyanalysis should be a valuable in the fourth quarter of 2008. Another reason on the development of CMVprogram was the license in January of exclusive rights, the Towne strain of CMVfrom the Wistar Institute. The Towne strain is one of the few live alternative CMVstrains which have been tested in humans. It was developed by Dr. Stanley Plotkin who was the former head ofresearch of Sanofi Aventis and a renowned vaccinologist, responsible for thedevelopment of Rubella vaccine. It hasdemonstrated both safety and ability to illicit target and immune response andseeing him on a number of human applications. Through collaborations in the Universityof California and San Francisco, we recently demonstrated theDNA vaccination provided a memory immune response that was boosted by asubsequent Towne vaccination. Subjectsprimed with the DNA vaccine mounted notably earlier immune response after the Towneboost then subjects who received Towne strain vaccine alone. This data was presented by Dr. Mark Jacobson of UCSF lastDecember at the vaccine congress in Amsterdam. A separate Phase 2/3 study sponsored by NIHis currently testing Towne vaccine in CMV co- negative women with children indaycare. So it is going to be a proof ofconstant study fully funded by the NIH. We have nothing to do with it, but we will obviously benefit from thedata. Children often get infected withCMV in the day care setting and transfer the infection to their mothers. If those females become infected with thepregnancy, the fetus can be directly infected. Congenital CMV is the leading infectious disease cause ofbone defects in the United States. Just the way Rubella was going on the 40’s and 50’s and a consequence ofreceiving infection during the first trimester of pregnancy can causeblindness, deafness, and mental retardation and the seriousness of most ofthese indicators, the deafness, and mental retardation manifest itself muchlater before they detect it. We outnumber the strong franchise of the CMV field as youknow we own a lot of gene sequence CMV field and with a licensure of the Townestrain we have a pretty solid base of intellectual property in CMV and providesus really broad options by addressing the congenital disease market which isthe last remaining big market after human papilloma virus in which market ismaking a lot of money these days. Influenza, our advance little program. Next, I will provide and update on where weare with this. Since the last conferencecall, we have made a significant progress and are now testing the vaccine atthe highest dose of 1 mg using both needle and needle and needlepre-device. We are trying to completerenrolment in the hundred subject trial by first quarter of 2008 and we willhave data by August of 2008 so again it has done well. And remember this is the first time in thistrial be a testing Vaxfectin in humans so we have gone through 0.1 mg had asafety pause, we had a 0.5 mg, then a safety pause and so far we have gonethrough Vaxfectin in humans. This is thefirst time that human is being tested in humans. I will remind you that our pandemic influenza formulated asI told is Vaxfectin Adjuvant. Ourprevious animal studies have demonstrated its potential utility with DNAvaccines against a wide variety of infectious diseases and stability toprovided those spreading advantages with conventional vaccines, both seasonaland pandemic influenza, interest in this adjuvant continues to grow and we arecollaborating with a number of programs and so we are eager to release theresults as quickly as soon as possible, particularly the human result in ourinfluenza study. Now, finally I have come to the 2008 outlook. We expect our licensee and just to submit afiling for marketing approval in Japan for its angiogenesisproduct. Potentially in the first halfof the year, that is where the party line is. However, in the security, which covers then in the world securityanalyst. In our report, recently projected but filing could early aslate March or April. So, were the menoptimistic to hear from our partner when that filing occurs? We expect an update by licensee Sanofi-aventis on the ongoing Phase 3 trial for its FGF 1 angiogenesis product, particularly interms of how the enrolment is going. We expectto complete our Phase-1 pandemic influenza trial as I mentioned. The enrolment will be completed in the firstQ of 2008 and we shall have data by the end of August 2008. We expect to complete and interim safetyefficacy analysis on our Phase 2 CMV vaccine and data should be available. Some time towards the late fourth quarter of2008. We continued to focus on patient enrolment and expect tocomplete the geographical expansion of clinical sites in our Phase-3 trial ofAllovectin-7, which is a very important product for us, particularly because wehave been working on it for a very long time and our partner is very supportiveof this program and has funded this program. Again, it is a licensee AnGes, which is also doing the program inangiogenesis and we are also rating data by the NIH sometime to be publishedthis year for the Phase 1 DNA vaccine for SARS. Everybody has forgotten SARS, but you know there maybe somebody who madesome of those bags and vacated in China,so I was maybe back and we are one of the few companies, which is, probably theonly company in the United States, to my knowledge doing a clinicaltrial in humans with SARS. So we are pleased with the advances that they made in a lotof programs this year so far, last year this far and so far in 2008 and we lookforward to completing this process and delivering payable results. That concludes my prepared comment. Operator, we are not ready to open thequality questions for my invited participants.

(Operator Instructions) Our first question comes from Allan Carr of Needham. Allan Carr – Needham: One quick thing, could you go over again, what you are goingto be looking at this interim analysis with CMV this fall? Or I guess end of the year?

There are three important things when you compare thevaccines and placebo. We are going tolook at viral reactivation okay. I meanif you see significant reduction in viral reactivation in vaccine, that is a big,big victory for us also, even if it is viral reactivation, how much of thetotal amount of anti-viral therapy both arms are going to get, because the waythe standard of care in some hospitals independent of viral reactivations startpatients on anti-virals quickly okay. Somaybe under the curve of the antiviral treatment that is required third isreally the viral load is there, a low viral load in the vaccine arm versus theplacebo arm, and those are the three end points. And safety of course which I a very importantelement to this trial or phase. Allan Carr – Needham: In your financial guidance for 2008, you mentioned that theguidance includes anticipated milestones in the equity investments from AnGes,can you tell us a bit more about the scale of that and essential for dilutionthat kind of thing.

No, as we said, the total trial cost which is going tospread over two to three years could be about $22 million and the way the trialhas been designed happy, funding is coming through equity, as you know thefirst crunch of funding that we got from them last year is worth $7 million andthat is all equity. What we got thisyear was $2.1 million, cashed in. So youknow, we are not publicly disclosed but your order on $23 million was with cashequity and as the payments come, some of our full cash, some are half cash,half equity. So I do not think it isgoing to be any used delusion that we are talking about. Allan Carr – Needham: Can you characterize, can you give me a little more clarityon that, or the amount that you might get this year then?

Well, it is dependent upon our spending but it is probablyin the ball park of about $6 million to $7 million. So total cash and equity.

Our next question comes from Eric Schmidt of Cowen AndCompany. Eric Schmidt – Cowenand Company: Thanks for the comprehensive update, just on the pandemicflue date or would you targeted for August. Is there a specific and all these that you have in mind or is that goingto be a press release, why is it specifically obvious?

We are debating, pressing me, why you are giving thespecific date because a lot of people say “When is the day they are goingout?” You know we do not know how tofind this occasion to you know it is going to be a day or vaccine forum or theidea will stay in an appropriate forum where assuming the data is going to begood and we are going to have to look for the forum, if we cannot find a toplevel for a vacating forum. We may justprovide a top line and hold the actual full date of disclosure Eric Schmidt – Cowenand Company: And then on the NIH HIV vaccine trial so you have any betterfacilities than we do, into whether that is going to happen now or was that outoff the table?

No actually, I was at the national foundation in Texas at this dinner twoweeks ago and most of the players were there. I think there a tremendous interest in trials. There are some – but there was a meeting inDecember where the agreement was to go forth at the trial, there is going to bea follow up meeting of the expert group that would occur some time in the nexttwo or three months which will be the final meeting and the trial willproceed. I think one thing for sure, thetrial will now be one thing, with the trial of 8500 patients will maybe brokenup into two or three branches. So theanswer is no. everybody seems to be inpeace so far, than some people who are actually, the clerical drivers for thistrial. Eric Schmidt – Cowenand Company: And if it goes forward, your P&L is the same. You arenot booking anymore?

No, we have got the $12 million; it is good to betransferred in other hands.

Our next question comes from Navdeep Jaikaria of Rodman& Renshaw Llc. Navdeep Jaikaria ofRodman & Renshaw Llc.: I have just a quick question, so I suppose you have a(inaudible) and then a flu data. In thepress release at the first half a more (inaudible) August some time?

The trial will be completed by the first half of 2008. There is a follow up on the trial. Actually, we have improved from what we saidin the press release. We are saying, theenrollment now will be completed by March. There will be about a three-month follow up. Remember, you got to bleed this patient thenyou got to do the assets next time. So Iput a little aggressive timeline today than what we have in the press release. Navdeep Jaikaria ofRodman & Renshaw Llc.: So you do have like a (inaudible)vaccine or therapy comfort around August, right?

I do not know. Normally, in major conferences, nobody allows you to submit an --withoutany data. It is a catch 22, right? Navdeep Jaikaria ofRodman & Renshaw Llc.: Yes.

So, if we do not have a conference, we will announcesomething to apply if we have to. Okay? Navdeep Jaikaria ofRodman & Renshaw Llc.: So, just a follow up question onthis, now you have positive data, and what is next?

Obviously, if the data looks good, we have the opportunityto go up to funding to do a large safety Phase 2 study, which is basically arepeat of the Phase 1 study and look for opportunities of, this is a veryimportant proof of concept for DNA, perspective. All of a sudden, it opens all kinds of applicationswhich will be holding back on which will not be publicly disclosed, so maybe itwill allow us to do something else. Navdeep Jaikaria ofRodman & Renshaw Llc.: Okay, I would like to have question about the melanomatrial, now that the method of the trial has run down and basically it hasfailed. And as I can tell, it looks likea fight like one of those and you saw half of (inaudible) patient. Is that better for you guys?

First of all, if you are hearing the information that thetrial has completed recruitment, that is what we are hearing, but that is goodnews for us. Okay? Navdeep Jaikaria ofRodman & Renshaw Llc.: No, no, no, I am saying the child (inaudible) child. So, still included I suppose, right?

I thought it is the other way around. So the point is, just absolutely, the rule ofthumb is there are less number of people recruiting in the melanoma field, thebetter off we are. Also, you need tounderstand that. You need to look ateach trials and their enrollment criteria. Their enrollment criteria are different, some have a much broaderenrollment criteria. We do not takebrain mets, so there are operations that have very serious liver mets, weexclude both liver and brain mets. So itdoes not translate one on one, but I think we are going after a very systematicbasis, we are including trials in the US,and we have now gone into Canada. We are slowly going into key Europeancountries and Brazil,so I think it is just keeping your nose to the grinding wheel and making ithappen. Navdeep Jaikaria ofRodman & Renshaw Llc.: May I ask a final question?

Sure. Navdeep Jaikaria ofRodman & Renshaw Llc.: You have talked about and just planned to file, for Japaneseapproval like early or late this year, do you have more information about theirplay in the USand how are they going to move forward with the way their PAD Program here?

All I can tell you is they are very excited about the USopportunity. They are making plans to dosomething in the United States, which they have not publiclydisclosed. But their first priorityright now is to get this Japanese application down, and I just mentioned thatthe analyst that covers them intensely is that they will file some time inApril. Our party line at the secondquarter. If that occurs, we will bepretty excited. But I just want toremind you something about the US,they have already completed two phase II projects in the United States ofPADs. Did you know that? So if and when they go to the United States and start this trial,they will be gong directly into phase III trial. Navdeep Jaikaria ofRodman & Renshaw Llc.: So that is like that they are going into see. They also are trying to fill similarindication here, right?

No, a similar indication here. Navdeep Jaikaria ofRodman & Renshaw Llc.: Okay.

: David Schwimmer - Goldman Sachs: Hi, thanks for taking the questions. First on the Towne strain for CMV. You mentioned the NIH study, is that usingjust the Towne strain alone? Is that inconjunction with DNA vaccine where you use any of your technologies?

It isTowne strain a lot. David Schwimmer - Goldman Sachs: Okay, great. And can you remind that you have exclusivelessons for the Towne strain?

Yes, we do. David Schwimmer - Goldman Sachs: Okay. Do you have anyplans to incorporate the Towne strain into your other CMV programs?

Not on our bone marrow transplant study because it is wellunderway. Two things, we acquired thisintellectual property because Towne strain is being used so extensively inhumans and has been found to be pretty safe. Live attenuated vaccines always have the danger of causing thedisease. So since the intellectualproperty was available, we acquired because we heard, and I am just conductinga lot of study. If that data looks good,then we can either go with that data on its own and piggy bank on that study,or we can do a DNA prime, which is a CMV Towne stain bruised into congenitalsettings. So we have two options, butthere is no rush to get into that program. We also have to look at how flu data looks, what flu dataperspective looks and gives a spectacular result in influenza; that could bepop on its own. David Schwimmer - Goldman Sachs: Okay, great, thanks. One other financial question as well, with all the news on auction ratesecurities, do have any exposure to auction rate securities?

Jill, you want to talk aboutthat?

We have a very small portion invested in auction ratesecurities. About $8 million is investedin auction rate securities but with a pending cash balance of over $70 million,that still allows us to have enough liquid cash, because it is just a liquidityissue. The auction rate securities thatwe have are backed by triple A rated municipal bonds and students loans thatare backed by the Department of Education, so we feel confident that this issuewill resolve itself and in the meantime, we have sufficiently liquidity to getthrough the next year end.

(Operator instructions) Our next question comes fromBrian McCarthy of Merriman Curhan Ford Brian McCarthy – Merriman Curhan Ford: Hello, thank you. Myfirst question involves the Sanofi Phase 3 PAD trial. I wonder if you have any updates regardingenrollments, and second, whether or not you expect they may release interimresults at any point?

We have not received any update on enrollment, but all I cantell you, and I can actually send you a link. They are doing a lot of market development there, a lot of televisionsports both in the East Coast and in Californiawhere they talk about beta disease when they advertise these trials. So in terms of trying to promote recruitment,they are also kind of making people aware of this CAD disease. I do not think that there is going to be anyinterim analysis, but based on their filing in 2010 as what they have said, weexpect the data some time to be available in ’09, so that is not too far away. Brian McCarthy – Merriman Curhan Ford: Okay, and then one last question regarding Meriel, anyinformation on the uptake of the Canine Melanoma Vaccine.

We should get reports. The first reports on the sales in the first quarter of this year, sonext turnings call, we should be able to tell you how everything is going. We have not heard yet also in terms of whatprogress have they made towards converting the condition approval to fullapproval, but we assumed that they are on track and we should be meeting withthem sometime early second quarter to review the progress of the program, butno news so far from them on the royalties.

And having no further questions,I will now turn the call back over to Mr. Samant.

Well thank you for participating in this call and we lookforward to staying new in the near future. All of you, thanks.

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