Alan Engbring - Executive Director, IR Vijay Samant - President and CEO Jill Broadfoot - CFO

Stephen Willey - Thomas Weisel Partners Eric Schmidt - Cowen and Company Alan Carr - Needham & Company

Good day and welcome ladies and gentleman 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 question-and-answers from invited participants after the presentation. I will now turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead sir.

Thank you, Laura. Hello everyone, welcome to our third quarter 2009 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, 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 third quarter 2009 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 in today’s call. I’ll provide an update on recent progress in our key development programs and our expectations for upcoming progress. We’ll then open the call to questions. But before that, I’ll ask Jill Broadfoot, our CFO to review our third quarter 2009 financial results. Jill?

Thank you, Vijay. For the third quarter of 2009 we generated significantly higher revenues than in the same quarter last year and we held the line on spending. We ended the quarter with our highest quarter end cash balance in over a year. Third quarter 2009 revenues of $3.9 million included increased recognition of funding provided by our Japanese partner AnGes reflecting the progress in our Phase 3 Allovectin-7 trial. During the quarter we received the final $2.5 million payment from AnGes scheduled during the trial bringing the total received to $22.6 million. We also recognized revenues in the third quarter for the shipment to the U.S. Navy of a dengue DNA vaccine we produced under our manufacturing contract. On the expense side, we have continued to operate at the reduced levels of R&D and G&A spending established after our restructuring last November. Through the first nine months of 2009, our operating expenses are more than $3 million lower than in the same period last year and we remain on track to achieve the predicted $4 million of savings from the restructuring for the full year. Excluding financing our third quarter 2009 net cash burn was consistent with our prior projections for a full year 2009 net cash burn of between $19 million to $23 million. As a reminder, we were recently awarded a $1.25 million Navy contract for H1N1 influenza vaccine development. Our goal is to complete preparation for our H1N1 Phase 1 trial by year end. If the payments for that work are not received by year end we could be at the higher end of our estimate. We were pleased to raise additional capital in July with an at-market registered direct placement of $10 million of common stock with our largest investor. We ended the third quarter with $55 million in cash and marketable securities up $6 million from the prior quarter and up $13 million from year end 2008. With that I will now turn the call back to Vijay.

Thank you, Jill. I’ll start today with the H1N1 swine flu, which continues to capture the attention of governments, media and individuals around the world. This is the first pandemic in over 40 years, but probably will be not the last pandemic in the next 40 years. The growing size and [charting] of the world population, widespread international travel and expansion of pathogen friendly climates driven by global warming are all increasing the likelihood of more frequent pandemics. We’ve been lucky so far that the current pandemic has been relatively mild. While, nobody knows how many people have been infected by the pan flu virus the numbers of documented hospitalizations and deaths have been low. Suppliers of conventional vaccines have responded to the current pandemic, but still have not been able to produce sufficient quantities quickly enough to meet the initial demand. More than likely about half of the U.S. population will not get the H1 vaccine due to a variety of reasons, including timeliness and availability of the vaccine and individual concerns about vaccine safety. By the time the current pandemic ends, the government will likely have spend an excess of $2 billion, bought too much vaccine and received most of it too late to be of any value. All of these issues highlight the need for a faster, simpler, and a less expensive approach to pan flu vaccines and that’s where Vical comes in. Vical’s goal for the current pandemic is straightforward and directly related to addressing this need. We have already demonstrated our ability to advance quickly through vaccine development and pre-clinical testing. We want to expand our human safety and immunogenicity data base to better position DNA vaccines and our Vaxfectin adjuvant for serious consideration in future pandemics. And most importantly we want to achieve this goal without risking shareholder dollars where there is no assured commercial opportunity. We believe the Navy is an ideal partner for this effort. They’ve direct experience in working with our technology. They’ve the resources and facilities needed to conduct a clinical trial. They are funding our manufacturing, clinical and regulatory preparation for the Phase 1 trial. We expect the Navy to secure additional funding to conduct the trial and we look forward to starting this as soon as possible. Allovectin-7, in our program for patients of metastatic melanoma, we are approaching completion of enrollment in our SPA designed Phase 3 registration trial we are on the last lap. We incorporated all the lessons learned in our prior trials and there were included in the design of the Phase 3 trial. We’re enrolling just to remind everybody chemo-naïve subjects with no brain med, so they are (inaudible) and with normal or better LDH which is an important enzymatic marker. These patients are most likely to survive long enough to benefit from the slow but what we believe are lasting benefits of immunotherapy approach. Our Phase 3 trial is being funded by AnGes MG, our commercialization partner in Asia. And as Jill mentioned AnGes made the final scheduled payment in support of this trial funding during this quarter, bringing that total investment to date of close to about $23 million. In addition to our partnership in Asia, we have sales and marketing agreements in place for Allovectin-7 with EIP in Turkey, with Teva in Israel. We have retained exclusive rights to market Allovectin-7 throughout the rest of the world. A third independent safety review will be completed on this trial in November. No significant safety issues were noted in the first two reviews. We expect to complete enrollment of the planned 375 patients by the end of 2009. If successful Allovectin-7 could receive the first approval in nearly two decades of new front line therapy for metastatic melanoma. The factors that eventually will determine our success includes our trial design, our ability to execute the management focus and the diligent detention to detail. Next I’ll provide an update on our Phase 2 TransVax therapeutics CMV vaccine program. In the last call we reviewed the encouraging results from our interim analysis of our full month follow-up, up to the month of July. These interim results which are available in detail on our website favor TransVax vaccine versus placebo across all relevant clinical end points and immunogenicity data. The scientific literature, notes the importance of T-cell immune responses in providing protection against CMV outbreaks in transplant patients. In our four month analysis we found notably high T-cell responses in the vaccine group than in the placebo group against both of the CMV antigens encoded in our TransVax vaccine which pp65 and the glycoprotein. Recently we ported the immunogenicity results at the seventh month analysis point and the trend continues to favor the vaccine or placebo. Later this month we’ll complete the last follow-up visit for all patients still on study and then we can begin to collect the final data. We look forward to reporting the final data in the first half of 2010. Additional developments just briefly, in our angiogenesis programs we are awaiting the approval of Collategene in Japan based on the NDA filed in March of 2008 by our partner AnGes. The HGF Gene Therapy for advanced PAD has the potential to be the first product approved for use in humans based on our technology and our Japanese partners still very confident of its approval. Our second angiogenesis partner Sanofi-aventis completed enrollment during the third quarter in its multinational pivotal Phase 3 trial of its FGF-1 gene therapy for advanced PAD. This is a 500 patient study. After the scheduled 12 month follow-up Sanofi expects to file a BLA in the second half of 2010 assuming the data is good. Our Vaxfectin adjuvant continues to generate data across the broad range of applications. As I told you before, Vaxfectin can be an important value drive for the company. During the third quarter we presented encouraging results from animal studies of a peptide based cancer vaccine formulated with Vaxfectin. Results from a mouse study demonstrated an 88-fold increase in antigens specific CD and T-cell responses compared with unformulated vaccine. The cancer vaccine formulated from Vaxfectin also reduced the number of lesions in the lungs and provided significant survival advantage. Also during the third quarter, we issued a patent providing board coverage for Vaxfectin formulated DNA vaccines against any circulating or potential influenza viruses, including both seasonal and pandemic strains. We’ve two articles on Vaxfectin published recently in a special issue of the journal Vaccine. One highlighted Vaxfectin’s improvement of performance of the Sanofi-Pasteur Fluzone seasonal influenza vaccine. The other provided some insights into the specific mechanisms by which Vaxfectin drives anti-body and/or T-cell immune responses. Our progress during the third quarter sustained at an aggressive space across breadth of our independent and partner development programs. We’ve secured initial funding for H1 Influenza vaccine program and we’re looking forward toward initiation of the Phase 1 trials. We are approaching completion of enrollment in our Phase 3 trial for Allovectin-7 and patients with metastatic melanoma. We’ll soon complete the last follow-up in our TransVax CMV vaccine Phase 2 trial, that’s a double-blinded study and we’ll have final results in the first half of 2010. We’ve also extended the breadth of applications and expanded the data base for our Vaxfectin adjuvant. We ended the quarter with sufficient cash to continue development of our most advanced programs for at least the next two years at minimum. Our goal through the end of 2009 and rolling into 2010 is to advance our programs towards completion as quickly as possible while maintaining a diligent focus on operational quality and data integrity. This concludes my prepared comments. Operator we now ready to open the call to questions from our invited participants. Thank you.

Thank you, Mr. Samant. [Operator Instructions]. And our first question comes from Stephen Willey with Thomas Weisel Partners. Stephen Willey - Thomas Weisel Partners: I was just wondering in thinking about the TransVax program, I know that you’ve got a toward end of Phase 2 meeting with the FDA and there is obviously some uncertainty around some of the primary endpoints in CMV disease and just kind of wondering how you’re thinking about a partnership and do you intend to have a partnership in place before you go into that meeting with the FDA?

I think before talking about partnerships, the important point that you raised is the primary endpoints, okay. I think most of the coalitions were operating in this space recognize that the viral load endpoint is probably the most important endpoint and as a result we are working with some leading experts to put a physician's paper to convince the FDA that that’s the right endpoint, okay. Because CMV disease, incidence of which is very low because of the treatment of antiviral is an unrealistic endpoint and I think our goal is to have such a physician's paper created in the 2010 time period. We are in discussions with the partners as I’ve said before, but this is a program, given its size and nature of the program that can be easily managed by us unlike the prophylactic vaccine, which is really a program we were definitely going to need partnering beyond the Phase 1/2 study. So, the answer is yes, but the other program has a much broader importance in partnership. Stephen Willey - Thomas Weisel Partners: Okay. So presumably a partnership you want to be involved I guess in what those discussions are around the basis of what’s going to service the primary end point, but it’s not a pre-requisite?

No, I think the most important thing. The partnership discussions are based on an end point, because most of the partners who understand CMV disease realize that viral load end points are very important points. I think people are going to wait for the full data. Remember we’re going to have data after four injections where the second reactivation seemly occurs after six months and that’s going to be very critical data in terms of end points of antiviral usage, the viral loads. The standard endpoints that we have are on the (inaudible) side, and how they hold up. Was the four month just a fluke in the data or this is a consistent thing that we are seeing through the entire 12 month follow-up. And the good sign for that is that we just showed these seven month immunogenicity data and that immunogenicity data is actually very much the same trend that we saw at four month data point. So, if that kind of holds up on the viral load endpoint, we don’t expect to see any data different than what we see earlier, which would be very fortunate in terms of our partnership discussions. Stephen Willey - Thomas Weisel Partners: And I know that there was some talk when you presented the interim TransVax data about potentially looking at an earlier or even a more frequent boost. Is that something that you guys are ready to address or is that something that will probably be discussed once you see the finalized data?

Yes, I think we have the ability to do that. Your question just a clarification for the rest of the audience should we accelerate the injection so that we get couple of more injections before the first 100 days as opposed to the current schedule? The answer to that question is we have a lot of flexibility there because as you remember when we did the prior Phase 1 studies we have done a study on this schedule, but we had done a study on accelerated schedule. So, we have safety data on both the schedules. Stephen Willey - Thomas Weisel Partners: Okay. And then just one more question quickly if I may, does Collategene have orphan drug designation in Japan?

I don’t know. Excellent question, we’ll follow-up and get back to you. I don’t know whether the concept of orphan drug status exists in Japan, but I will get back to you.

Our next question comes from Eric Schmidt with Cowen and Company. Eric Schmidt - Cowen and Company: Good morning, Vijay. Just kind of looking for some insights into the timing of Phase 1 studies for the H1N1 the flu vaccine, you’ve got the funding now for the Navy, (inaudible) can you pull the trigger and start up that study and when might we see results?

I think you’ll see the results in the first quarter. Unfortunately, we are now approaching the holidays and more so, we have generally really no idea how hard it’s going to be recruit patients, because people are getting vaccinated with H1N1 and people are getting the flu. So, we don’t know what our screening effort is going be for the 30 patients that we’re going to do. We’re going to need 300 patients to be screened or its going to be just 30 patients like we screen in H5N1. But by end of first quarter, no later than end of first quarter we should have data. So, that will be the farthest it can go, hopefully much sooner than that. Eric Schmidt - Cowen and Company: And does the contract you have, have any provisions in it for what might happen after you get the data, should you see some level? And is there a plan for it or will that all need to be negotiated with time?

Well those all had to be negotiated. I think, but having said that we are having ongoing discussions with the Navy in terms of the funding agencies and getting them familiar with vaccines manufacturing capabilities, our ability to conduct clinical trials. So, that ongoing dialog and confidence building is going on and will continue. So, if the data comes out we’re not caught flat footed and Navy does have the ability to funds such programs.

[Operator Instructions]. And we’ll take our next question from Alan Carr with Needham & Company. Alan Carr - Needham & Company: There is a little bit of an uptick there in the manufacturing spend. Is that related to the dengue vaccine for the Navy or why is that up a little bit in the third quarter?

Jill, you want to answer that.

Yes, that’s definitely related to the shipment of the dengue vaccine. Alan Carr - Needham & Company: Well, okay. The other question, you talked about Vaxfectin during your prepared remarks. I wonder if you could go over the strategy around this, what’s the opportunity for Vical here?

Well, I mean the opportunity is all data driven, right. The opportunity cannot be created till we have data, and one of the key things we are doing is we are working with a number of people in terms of giving them access to Vaxfectin and use them, let them use it in their own animal models to see whether Vaxfectin can do better than their best mousetrap that they using. If these companies get that data, which is better than what they are using their best data than obviously Vaxfectin is going to create wondering opportunities. And we are using companies both in the cancer space and the vaccine space. And so, we have more data that will come out in 2010, which we have not publicly disclosed since we are working with companies. Some of data may not come out which may lead to partnership, but data is not good you may not hear about it. Alan Carr - Needham & Company: Do you anticipate an exclusive deal around this one or several non-exclusive deals in the next year?

Sure. It all depends on the antigen and the vaccine, the disease targets. Some companies are based on the certain disease targets they want to get an exclusive position. If companies already have a lot of intellectual properties surrounding their antigen, then there is no reason to get an exclusive, because their intellectual property trumps the expected intellectual property. So, they’ll go for a non-exclusive license.

And there are no further questions at this time. I will now turn the call back over to Mr. Samant.

Well, thank you everybody for participating in this call. We look forward to seeing you at the next quarter. Thank you again.

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