Alan Engbring – Executive Director, IR Vijay Samant – President and CEO Jill Broadfoot – SVP and CFO Alain Rolland – SVP, Product Development

Stephen Dunn – Dawson James Alan Carr – Needham & Company Brian McCarthy – Noble Finance Eric Schmidt – Cowen & Company

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 the conference up for questions and answers from invited participants after the presentation. I would now like to turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, Sir.

Thank you. Hello everyone, welcome to our fourth quarter and full year 2008 financial results conference call. Participating on the call today are Vical’s President and Chief Executive Officer, Mr. Vijay Samant, and Vical’s Chief Financial Officer whose name recently changed from Ms Jill Church to Ms Jill Broadfoot. I will begin with a brief notice concerning projections and forecast. This call includes forward-looking statements including financial expectations and projections of progress in our research and 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 fourth quarter and full year 2008 financial results. These forward-looking statements represent the company’s judgment as of today. The company disclaims, however, 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, Alan, and welcome to all our participants. We will start today with an update on our progress in some of our key programs. We will wrap up our call with a detailed financial review and forecast by Jill Broadfoot, our Chief Financial Officer and then open up the call to questions. I will begin with recent highlights on our CMV vaccine program. Just a week after our call in November, we announced the completion of enrollment and reported interim immunogenicity data from our CMV vaccine phase 2 trial in stem cell transplant recipients. In a related significant development this year, last week was the failure of the anti-viral drug Mirabavir [ph] to achieve the primary or the key secondary endpoints in its phase 3 trial. This anti-viral drug did not demonstrate statistically significant difference versus its placebo for its primary endpoint of reducing CMV disease or for the key secondary endpoints. We believe this failure highlights the continuing need for a vaccine to address the shortcoming of the current treatments for this high-risk patient population. Let me take a minute to review the design and goals of our trial and then move on to our outlook. Patients undergoing bone marrow typically are suffering from advanced cancers of the circulatory or lymphatic system; these patients typically receive a transplant from a healthy donor which gives a start to rebuild their immune system. The transplant recipients are treated with immunosuppressive drugs to prevent graft rejection but suppression of the immune system frequently allows latent CMV to reactivate causing serious medical complications during the recovery period. Our vaccine is intended to reduce and hopefully eliminate the need for anti-viral drugs to control CMV during this period. In November we completed the enrollment of the full 80 subjects and reported on the interim immunogenicity analysis for the first group of 33 recipients. The results indicated significant enhancement of CMV specific immunity as measured by T-cell responses to both CMV antigens targeted by the vaccine pp65 which is an internal antigen and gB which is a surface antigen both with p values of less than 0.05. These results are encouraging because independent publications have shown that increased CMV specific T-cell responses following the bone marrow transplants have predictable favorable clinical outcome as measured by endpoints such as limited levels of active CMV and reduce CMV disease. In the second quarter of 2009, we plan to report expanded safe T and immunogenicity results and initial clinical efficacy results on the full cohort of transplant recipients after a four-month follow-up. The efficacy analysis will compare vaccine versus placebo groups using multiple efficacy markers including, a) frequency of viral reactivation; b) total anti-viral therapy; and c) viral load. We believe these endpoints are key indicators of patient benefit for bone marrow transplant patients. The successful launch of Merck’s Gardasil for the prevention of HPV or human papilloma virus demonstrated the size of the market for vaccine to protect adolescent females. Prevention of congenital CMV is the next significant commercial vaccine target for this demographic. Among those at greatest risk for CMV are infants born to mothers who are infected during pregnancy, especially during the first trimester. Congenital CMV is the leading infectious disease cause of birth defects in the United States similar to Rubella in the 40s and 50s. Infants born with CMV infection can be affected by blindness, deafness and mental retardation and these consequences are frequently undiagnosed until the child reaches several years of age. Widespread vaccination has the potential to reduce significantly or even eliminate congenital CMV over time. We believe the best approach for this market segment is an antibody focus monovalent and DNA vaccine including the gB antigen, one of the two antigens currently used in our transplant vaccine. We intend to formulate this vaccine with same Vaxfectin adjuvant used in our successful pan flu vaccine trial; we are actively validating opportunities to move forward with such a program and are currently in discussion with experts for a development of an appropriate trial design. Next I will provide an update on our lead independent product development program, our phase 3 registration trial of Allovectin-7 in patients with advanced metastatic melanoma. Funding of the phase 3 trial is provided by AnGes MG, our partner for commercialization in Asia. We recently received a cash payment of $2.3 million bringing the total cash plus equity received to date to $17.6 million of the $22.6 million committed by AnGes. In December, we announced the sales and marketing agreement for Allovectin-7 in Turkey. Our Turkish partner, I have difficulty pronouncing this name, Eczacibasi, is the leading pharmaceutical company in the region and has a successful track record under multiple licensing agreements with major biotech and pharma companies including AmGen, Pfizer, Procter & Gamble, and Sanofi-Aventis. Eczacibasi will help us initially with patient recruitment in Turkey and then with regulatory approval and commercialization of the product. The agreement is a logical extension of our efforts overseas where we are making good progress including patients as we continue to expand to clinical sites across Western and Eastern Europe and Turkey and Israel. We expect to open several sites in Brazil within the next month and with our sites in the United States and Canada, we will have more than 100 sites recruiting in key locations worldwide as we advance towards the final months of enrollment. Based on the spends [ph] across these regions, we are confident that we will be able to complete enrollments in this pivotal phase 3 trial by the end of the current year. After completion of enrollment, the follow-up period is fixed and the trial endpoint is durable response rate is well defined under the terms of our SBA. If we beat this pre-agreed endpoint, we should easily qualify for a fast-track review by the (inaudible) which should minimize the post-trial time to product launch. We believe that Allovectin-7 has the potential to offer an attractive alternative to patients with metastatic melanoma where no new first-line therapy has been approved in the last 15 years. I will now move to give you a brief update on our pan flu vaccine program. We initially reported in July that our monovalent vaccine achieved potentially protected levels of H5 antibody responses in at least 50% and up to 67% of the valuable subjects in a high-dose squad of 100-subject phase 1 trial. These responses are in line with the results of inactivated protein-based H5N1 vaccines which is a real breakthrough for our DNA vaccine technology. We subsequently reported that in two vaccine cohorts receiving the highest 1 mg dose of H5 DNA 80% to 100% of the responders had sustained responses through day 182 that is about six months. Durable responses could be important for sustained protection during a pandemic. We also reported that our monovalent vaccine induced antibody responses against strains of H5N1 influenza vaccines from two different clades representing broad cross-clade reactions to our vaccine. Cross-clade responses could be important providing protection against emerging strains of influenza before a matching vaccine could be developed. Our monovalent vaccine induced H5 T-cell responses in 75% to 100% of subjects in the various cohorts. T-cell responses could be important in protecting against serious disease and in limiting the spread of disease during an outbreak. Our trivalent including the Vietnam H5 antigen plus (inaudible) antigens nuclear protein and M2, this vaccine induced antibody and our T-cell responses in 72% of the subjects. Responses against (inaudible) antigens could provide protection against serious disease or death during an outbreak of a new strain of influenza of which a matching vaccine is yet to be developed. The seeking of funding for further development of this vaccine has multiple objectives, we believe we can further optimize the vaccine dose and formulation ratio, confirm the safety and immunogenicity in a large number of subjects and leverage this proof of concept for our DNA vaccine platform and the Vaxfectin adjuvant into additional applications such as congenital CMV. We are currently exploring potential funding sources for further development of this program. Running out our new scores since our last call, we had several important developments in partnered programs. Dengue, we announced collaboration with the US Navy and the US Army to conduct a pre-clinical and a phase 1 evaluation of a Dengue DNA vaccine formulated with our Vaxfectin adjuvant. Dengue virus infect up to 100 million people each year and there are no effective anti-viral drugs and vaccine. As many as half a million people develop severe Dengue disease during each year causing tens of thousands of deaths especially where healthcare is limited. The US government’s program is intended to develop a vaccine to protect troops being deployed in Dengue endemic regions, our goal here is to manufacture the vaccine and the Vaxfectin adjuvant under a $1.3 million contract and provide regulatory and clinical expertise to the US Navy. In December we announced the receipt of $1 million milestone payment from Merck based on the planned initiation of a phase 1 plasmid DNA cancer vaccine trial. The new vaccine includes hTERT, a form of human telomerase and will be evaluated in patients with broad range of solid tumors. Merck also has a cancer vaccine trial that uses a DNA vaccine encoding HER-2 and CEA and the trial is still ongoing. We also announced the publication of results from an NIH phase 1 trial of a DNA vaccine for SARS, these results demonstrated the vaccine was well tolerated and induced neutralizing antibody responses in 80% of the subjects and T-cell immune responses in all the subjects. This was the first SARS vaccine during a clinical trial conducted in the United States and it was initiated with unprecedented speed. Since the completion of the trial, the NIHS transferred the R&D back to Vical and we have the option to continue development of the vaccine when a medical need arises. Next, I will ask Jill Broadfoot, our CFO to review our fourth quarter and full year 2008 financial results and our financial outlook for 2009. Jill?

Thank you, Vijay. During the fourth quarter it became increasingly apparent that the financial markets were not likely to recover in the near term. We concluded that we needed to pursue and confirm potential sources of revenue, rationalize our activities and reduce our spending to make our available capital last as long as possible without compromising the scope or pace of our key development program. On the revenue side, we continued to look to our collaboration and to a lesser degree our contract manufacturing activity. In the fourth quarter we received $1 million milestone payment from Merck related to the start of a new phase 1 cancer vaccine trial. We also announced a $1.3 million Dengue vaccine program to the US Navy and US Army that will involve contract manufacturing, regulatory and clinical support. On the spending side, we announced in late November a strategic restructuring that included a 20% workforce reduction and the early closure of a research facility. The primary benefit of the restructuring is the reduction of our cash burn by approximately $4 million per year. Our efforts are now focused on our two late-stage products development program Allovectin-7 and our CMV vaccine and our near-term goal is to advance these programs towards the achievement of key milestones. We recorded financial results today for the fourth quarter and full year 2008. These results included $0.8 million restructuring charge and the recognition of $1.1 million loss on our long-term auction rate securities. Even with these charges, our results were within our forecasted net loss range. Without these charges, our net loss would have been $35 million, near the middle of our forecast range. Our net cash burn was also within our forecast range and we ended the year with $42 million in cash. For 2009 our projected net loss is in the range of $24 million to $28 million and our projected net cash burn is in the range of $19 million to $23 million. We believe that our current cash balance coupled with the anticipated revenues and spending is sufficient to last through 2010; we expect that between now and then, continued progress in our programs and some degree of recovery in the financial market will allow us to extend that cash run rate even further. I will now turn the call back to Vijay.

Thank you Jill and the conclusion we look back to 2008 as a year of great progress for the company and look forward to the reminder of 2009 for a seize of significant milestones in both our independent and partnered programs. We are managing the business to stretch [ph] our cash through this difficult economic climate while continuing to drive our key programs forward. That concludes our prepared comments, operator we are now ready to open the call for questions from my invited participants.

(Operator instructions) Our first question will come from Stephen Dunn with Dawson James. Please go ahead sir. Stephen Dunn – Dawson James: Yes, good morning and thanks for taking my questions here. I guess I would like a little color on your opinion of how farmers are disappointed with results with Mirabavir compared to Vical’s vaccine, could you give us some color, compare and contrast and give us your opinion on what happened.

I think first of all I think there is a fundamental difference between their program and our program. Their program is an anti-viral drug which was used essentially in combination with the current anti-viral treatment which is given post transplantation which is Gangcyclovir. So their goal was to give their drug pre-transplant and give Gangcyclovir post transplant and both are using basically the same mechanism which is an anti-viral mechanism which is basically a chemical mechanism. Ours is more of a biological mechanism, you are teaching the immune system to detect CMV and control it and protecting (inaudible). So with anti-virals you are stuck with anti-virals, any time there is an outbreak you got to go back on anti-virals and with that you get its associated toxicity. Vaccine on the other hand, once you get it you have lifetime immunity against that particular infection so completely two different approaches. So we believe that CMV is a hard disease and anti-virals is not the solution for protecting against CMV and vaccines is the best way to go forward. Stephen Dunn – Dawson James: Okay, on the congenital CMV, are you looking to vaccinate girls as they reach puberty or are you looking to vaccinate – yes, I just want to make sure that you are not looking at vaccinating within the first trimester.

No, I think the goal would be is to make it a routine vaccination program for adolescent females so that you are protected and not wait. I think by the time you reach the first trimester in the pregnancy, it gets too late and conducting a clinical trial trying to give vaccination to females who are all already pregnant involves whole huge risks associated and the timeframe of beginning with that vaccine trial. So the best way is to show that you give adolescent females the vaccine and give them CMV immunity from the very beginning. Stephen Dunn – Dawson James: I just want to get rid of the H5N1 a little bit, I kind of try to read between the lines, are you going, is Vical going to progress into phase 2 by itself or are you requiring a partner to fund that?

No, we have said this in the protocol, we have said it in all our public that we will not go ahead independently on a phase 2 trial until we get funding either from a partner or from a government or a non-governmental organization because really the market for pan flu is the Federal government and we are not going to spend shareholders’ money to do that. It was great for us to get money from the US government because it allowed us to validate the use of Vaxfectin in humans but to go to the next stage; we are expecting money from a third-party source not by trial funding. Stephen Dunn – Dawson James: Would it be safe to say SARS is in the same situation?

SARS is absolutely in the same situation and the beauty about SARS is that we have the R&D in our possession, phase 1 trial has already been conducted, the vaccine is safe, it is immunogenic, it invokes antibody responses, it invokes T-cell responses in all the people. So if there is an outbreak of SARS and if we are the shop that everybody is going to come and say, okay, can you make the vaccine if there is an emergency approval we will need it. Okay. Stephen Dunn – Dawson James: One more question and I will jump back in the queue, we are expecting enrollment to complete by the end of this year in your phase 3 for melanoma, how long before we would see top line data?

Sure. If the trial recruits by the end of the year, there is at least six months of follow-up data means the patients are to be followed for six months. So you would see data some time, Alain and you jump in, towards the end of the year.

Late next year.

Late next year. Stephen Dunn – Dawson James: Okay. Alright, thanks very much guys.

Thank you.

(Operator instructions) We will pick our next question from Alan Carr with Needham & Company. Alan Carr – Needham & Company: Hi good morning everybody.

Hi, Alan. Alan Carr – Needham & Company: I may have missed this but could you tell us a bit more about what sort of data you are going to getting around this CMV trial in the second quarter.

Okay, well we just covered that in a minute, but I will go through it so the three things that we are going is we are going to see the three efficacy markets our frequency of viral reactivation, how many times we get a viral breakthrough in those patients comparing between again the vaccine arm and the placebo arm, that is one of the first endpoints that we will be looking at. We are looking at the total amount of drug or anti-viral therapy that is used between both groups, that would be a clear indication of the efficacy, and third we will be looking at viral load because viral load really is a key endpoint in terms of what is the total viral load between both groups. Alan Carr – Needham & Company: Is this the final data from the trial, obviously everyone is enrolled, how long will they be on the drug and is this going to be the final for that data or is there going to be another around after that?

There is another round, excellent question; this would be data four months after enrollment into the trial. There is another vaccination point that occurs six months after enrollment to the trial so this is to prevent the second outbreak, normally there are two outbreaks of CMV first, one occurs within the first six months and generally the second one occurs in the next six months. We have a six-month vaccination point so there will be follow-up data occurring on the six-month vaccination to see how this same efficacy endpoints accrue on that six-month endpoint and that data should be available early next year. Alan Carr – Needham & Company: So when you finished enrollment last fall, we are going to see data four months from that point, right?

Yes. Alan Carr – Needham & Company: And then you will have another vaccination at six months, and we will wait how long after that to see an impact of that second vaccination occur.

We will have a three-month follow-up. That is what I am saying; it will be about 2000 early 2010 when we will get that data. But if the data in the first four months looks good there is no reason the data in the next six months is going to look bad. Okay? Alan Carr – Needham & Company: So we will have some sort of intermediate tightening [ph] there which is four months after the first and then we will have another one that will be three months after the second one.

Correct. Alan Carr – Needham & Company: Okay and then, I think Jill, around financial guidance for ’09, how should we look at expenses through the year; is there going to be more of an impact on R&D, SG&A, or manufacturing and production in 2009 in terms of reduction in cost?

We should see reductions across the board but if you just look at the clinical trials that we had in place in ’07 and ’08 versus ’09, we had the flu program going on in both of those years. So in ’09 we will be focusing solely on Allovectin-7 and our CMV program. So you will see a reduction and –

And remember in the CMV program, we were an active clinical trial last year so there were clinical trial for us, this year is primarily data collection more and data analysis mode, okay, and in terms of proactively designing a phase 3 study. Alan Carr – Needham & Company: So that you are manufacturing and production should come down as well–

Yes correct.

Unless we do contract manufacturing and that is a revenue that is cost neutral because if anything you make money on that particular activity. Alan Carr – Needham & Company: Actually I think Jill you mentioned that that you were putting less emphasis on seeking contract manufacturing in ’09 or were expecting less of that, did I hear that right or–?

Not less than in the prior year is that it is just our focus is on more collaborative types of partnerships than on contract manufacturing.

Yes, the other thing also is we are now approaching the end of Allovectin-7 trials as you know. Assuming that everything is going to work for Allovectin-7, we feel pretty good about how the trial is going and there is a huge amount of activity that needs to be going in manufacturing particularly as it relates to validation. And for biological products it is a pretty intense activity and it has lead times of almost a year so we don’t have to start undertaking so and so’s process validation, cleaning validations to be prepared when we file our BLA. Alan Carr – Needham & Company: Okay. Alright that is good, thanks very much. I appreciate it.

We will take our next question from Brian McCarthy with Noble Finance. Brian McCarthy – Noble Finance: Hi, good morning.

Hi, Brian. Brian McCarthy – Noble Finance: I was wondering if you had a better idea regarding when you might expect comments out of Sanofi regarding the peripheral (inaudible) phase 3 and then more specifically if you had any costs regarding what they may be talking about at that point.

Normally they have an analyst day (inaudible) in the month of Feb usually but this year they have not scheduled it. We should hear something from them, an update from them in the second quarter of this year but from all their public statements they have told us that they expect to complete enrollment by – they expect to file sometime next year, so we are hoping that the enrollment will be completed by year end this year. So by second quarter we should be able to report something from them. Brian McCarthy – Noble Finance: Okay, thank you very much.

We will go next to Eric Schmidt with Cowen & Company. Eric Schmidt – Cowen & Company: Good afternoon or good morning Vijay, just a question on the Allovectin-7 pivotal study, is there either a futility or efficacy interim analysis including that protocol?

No there is no futility, there is no analysis. If we do that, we will take a statistical hit. It is just collecting data. Right now, there is an SMB, there is no TSMB here which looks like safety, you remember, it is a small trial Eric. Look at what the other people have done, other companies are doing melanoma, they are doing 700 to 800 patient study. This is a 375 patient study, so we have limited power in this study. So absolutely there is no futility analysis, no interim loss. Eric Schmidt – Cowen & Company: Okay, it is very clear, thanks.

And at this time, we have no further questions. I would now like to turn the call back to Mr. Samant for closing remarks.

If there are no further questions, I want to thank all of you for participating in this call and we look forward to seeing you soon. Thank you again.

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