Alan Engbring – Executive Director, IR Vijay Samant – President and CEO Jill Broadfoot – SVP, CFO and Secretary

Alan Carr – Needham & Co. Ren Benjamin – Rodman & Renshaw Craig Gordon – Cowen & Co. Stephen Willey – Thomas Weisel Partners

Good day everyone, and welcome to today’s Vical Incorporated financial results conference. 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 like to turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead sir.

Hello everyone. Welcome to our year-end 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 year-end 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 review and expand on our recent developments, and provide our outlook for the remainder of the year. We’ll then open the call for questions. But before that, I’ll ask Jill Broadfoot, our CFO to review the 2009 financial results. Jill?

Thank you, Vijay. In 2009, we generated higher revenues and reduced overall expenses compared with 2008, and we ended the year with sufficient cash to last at least through the next two years. 2009 revenues of $12.7 million included increased recognition of funding from our Japanese partner, AnGes, as we advanced in our Phase 3 Allovectin-7 trial. We also recognized revenues for the shipment to the U.S. Navy of a dengue DNA vaccine we produced under our manufacturing contract. On the expense side, we maintained the reduced levels of spending established after our restructuring in November of 2008. In 2009, we reduced total operating expenses by $4 million compared with 2008 as predicted at the time of the restructuring. Excluding financings, our net cash burn for 2009 was $22 million within our projected range, and we ended the year with cash and investments of approximately $53 million. We raised $30 million of capital through two registered direct placements during 2009. In addition, we issued $10 million of warrants, of which $7.5 million have now been exercised. We are projecting a net cash burn for 2010 of $20 million to $24 million, including anticipated receipts from new or expanded partnerships not currently contracted. With that I will now turn the call back to Vijay.

Thank you Jill, and I will start today with our lead independent program for patients with metastatic melanoma Allovectin-7. We announced completion of enrolment in our Phase 3 registration trial last month, and we're really excited that our recruitment went so well. We are now focused on completing treatment and follow-up, and I would like to briefly review why we believe we are well positioned to win with this trial, where others have failed. We incorporated a number of success factors in the Phase 3 trial design through the SVA [ph] process. Those factors leveraged the lessons learnt from our prior trials and trials conducted by others. So let me just list some of the factors that favor our Phase 3 success. We have enrolled patients with stage 3 and 4 melanoma, recurrent melanoma patients who are chemo naive, and by definition chemonaïve patients live longer. We have recruited patients, who have no brain mets, (inaudible) other than lung mets, and the most important thing we have done, which everybody is now jumping on this bandwagon is we're using a normal LDH level in the patients. And all those LDH levels are measured by central lab assay. We believe that this healthier patient population has a better chance of surviving long enough, since they are more likely to have healthier immune systems providing a better chance for Allovectin-7 to work. We designed our Phase 3 protocol to keep patients longer on the study. About two thirds of our patients in our previous Phase 2 dropped out before finishing one cycle of treatment, before Allovectin-7 had a chance to work due to strict RECIST criteria that categorize response of progression. Most responses in our Phase 2 trial occurred after at least after two cycles of treatment. Our Phase 3 protocol allowed by the FDA, under SPA, let our investigators keep patients in the study through two full cycles of treatment under a modified RECIST criteria. Even if they develop new regional lesions, as long as those lesions are not clinically significant. Our primary endpoint response rate of 24 weeks or more highlights the durable nature of immunotherapy response. All responses in the Phase 2 trial were active at 24 weeks or more. Historically in other trials, few dacarbazine or temozolomide patients have had active response after 24 weeks. In addition, all responses in our Phase 2 trial were durable. The median responsive duration of 13.8 months tells only a part of the story. The minimum duration of response was 6 months, and the longest is now more than five years and still ongoing at the last checkup. The historical median duration of response for dacarbazine and TMZ was 3 to 4 months. And that is really lower than the lowest of our range. So just to kind of repeat what I said before, the minimum response that we had was 6 months and the longest now is about 5 years. So it is an amazing set of data that we have from our Phase 2 study. Our second endpoint of survival could be a compelling factor in the approval process. Overall median survival data from our Phase 2 study has been updated recently and it is now almost 19 months for Allovectin-7, despite the high rate of early dropouts versus 8 to 12 months for historical dacarbazine and TMZ controlled. Long-term stable disease patients may not have response rate, but definitely helped survival. In addition to these success factors, we believe the safety profile and convenience of outpatient administration make Allovectin-7 a very attractive option for patients. Remember, the median age of patients in our Phase 2 trial was about 60 years. We have completed three independent safety reviews in our Phase 3 trials, and there were no serious adverse events related to Allovectin-7 reported today. Our protocol requires follow-up on all accessible patients, until they reach either the confirmed response, disease progression, death or at least one year with stable disease. Follow up beyond the minimum could further highlight the anticipated advantages of Allovectin-7. While survival is a secondary endpoint in our trial, a survival advantage could provide compelling support for an approval dossier. We are excited by how this trial has progressed, and we want to make sure we allow enough time for the data to mature. Based on this information today, we would expect to lock the clinical trial database around mid-2011. As we gain further insights by monitoring trial progress over the coming months, we will provide periodic updates and timelines. We believe Allovectin-7 is well positioned to become the first treatment for metastatic melanoma approved in nearly 2 decades. Next, I will provide an update on our CMV vaccine program. We are one of the few companies pursuing development of a vaccine for CMV, and believe a successful execution would lead to a strong position in this field. In our Phase 2 trial, our TransVax therapeutic vaccine for transplant patients – I'm getting a sore throat. Hold on one second. Excuse me. Bear with me for a second. Our Phase 2 trial has completed follow-up, and we are now collecting and auditing data for all patients. These data are extensive because they are very sick patients. Their significant medical histories and related complications can generate a lot of reports. We expect about 15,000 pages of case report forms with this trial, and we need to make sure they are all complete and correct. That collection process is now going on, and we will now follow the data analysis, which we expect to complete by mid-2010. Jill you want to continue with the (inaudible).

Sure, the T cell immune responses are particularly important in providing protection against CMV outbreaks in transplantation. For that reason, we formulated TransVax with a poloxamer, intended to drive primarily T cell responses. The second product in our CMV franchise is CyMVectin, our prophylactic vaccine, intended to prevent infection in women before they become pregnant to protect against transmission of CMV to the fetus during pregnancy. CyMVectin is formulated with Vaxfectin to drive primarily an antibody response. We have designed the Phase 1 trial of CyMVectin, and I'm pleased to announce that an IND has been allowed by the FDA, clearing the process to move forward with this program. We are exploring the best way to advance, whether independently on with a corporate partner.

Thank you, Jill. I will try another chance. I really have a bad cold. Pandemic influenza, I will now move to our pandemic influenza program, and I will start with an obvious question. Why are we still working on pan flu after the H1N1 pandemic appears to be over? We start with the promise that future pandemics are inevitable. Okay. And more outbreaks are expected. We believe it is not a question of if, but when the next one will occur. It is also a question of which strain will cause the next one, and how severe it will be. We are all very lucky with the H1N1 pan strain, which was relatively mild leading to a fairly low number of hospitalization and death. The next one maybe not as gentle. Despite the moderate impact of the current pandemic, the H1N1outbreak has definitely served as a wake-up call to the shortcomings of the established vaccine approach. The need for a faster, simpler, and less expensive approach to pan flu vaccines are now clearer than ever. For Vical, the H1N1 pan flu offers an opportunity to demonstrate the potential of our technology. Funding for our Phase 1 trial is provided by the US Navy, and it is supported by the Department of Defense Transformational Medical Technologies Initiative. TMTI, which is a very important organization, whose mission is to protect active US military personnel against the merging of genetically altered biological threats, by discovering and developing medical countermeasures. This government funded trials allows us to build on the success of our H5N1 vaccine and generate more pan flu data to expand the safety and immunogenicity database in humans for DNA vaccines, and expect an adjuvant to evaluate the potential of our platform to provide up to 3 million doses of vaccine and the amount needed for rapid protection of military personnel against future emerging disease threats and to open to door to broader collaborations with the US government. We are working with the Navy to advance this program. We have complete preparations for the Phase 1 trial, including IND filing allowance. We expect the Navy to secure the additional funding needed to conduct the trial, as soon as the snow blanket in Washington subsides, and we expect the trial to start soon. Let me just touch on the collaborations, and a very important development yesterday, our angiogenesis partner, Sanofi Aventis, has finally chosen a marketing name for the product, and I don't know whether I am pronouncing it correctly, it is Tmusi for its FGF-1 gene therapy, and expects to present the data in the fourth quarter of 2010 from its multinational pivotal Phase 3 trial for advanced PAD. Just a reminder, the Phase 3 trial is an exact replication of the Phase 2 study, which was in 107 patients, where they actually met all the end points. So assuming everything goes well, we should expect to receive positive data from this trial. Our other partner, AnGes entered into a special protocol assessment agreement with the FDA for a Phase 3 trial of its collategene gene therapy for advanced PAD to be conducted in the United States and potentially other countries. AnGes is seeking a partner to help advance these efforts, and is awaiting an approval decision in Japan, where they filed for approval in March of 2008. Another piece of good information that happened in the last month, our animal health licensee Merial received full approval of its canine melanoma vaccine, and launched the newly named ONCEPT in January. Dogs that are successfully treated often suffer a relapse and subsequent survival is typically only few months. ONCEPT dramatically improved survival numbers for dogs treated in clinical trials, and its premium pricing should drive substantial revenues as the roll out progresses. In conclusion, we have made terrific progress during 2009. We are expecting continued progress in our independent and partnered product development programs in 2010. We will continue to provide you updates on Allovectin-7 program as we advance towards trial completion. We expect to have final results from our TransVax CMV vaccine Phase 2 trial in mid-2010. We expect to secure funding for our Phase 1 trial of our H1 pan flu vaccine and the trial should begin shortly. We ended the year with sufficient amount of cash. We had a cash burn only of $22 million in 2009, and we expect to manage this cash for at least two years as we advance most of our advanced programs. This concludes our prepared comments. Operator, we are now ready to open the call to questions from invited participants.

Thank you, Mr. Samant. (Operator instructions) We'll go first to Alan Carr, Needham & Co. Alan Carr – Needham & Co.: Hi, good afternoon, everyone. A question around the Sanofi program, it's moving along, obviously Phase 3 data towards the end of the year. What sort of milestones can we expect to see around there? Are there milestone payments that come with completing the trial or NDA or BLA submission?

Well, we haven't disclosed them, magnitude of milestone payments, but I think we have collected about I guess $7 million to $10 million from them. Correct me, if I am wrong Alan, since the original licensure. As I have told people, the milestone payments are modest than our big milestone payments. However, we stand to collect mid single-digit royalties assuming worldwide commercialization of this program. Alan Carr – Needham & Co.: The reason I asked is that I'm trying to get a sense of the assumptions that you all are making with respect to your cash burn guidance this year, I'm wondering how much – you mentioned its new or expanded partnerships or that may not be contracted yet. I'm just wondering how big the –?

No. We – you need to look at the number of opportunities we have in the area of partnerships, right. We have opportunity to partner Allovectin-7 in Europe. We have told you that we have been working with Vaxfectin with a number of partners. We also have the opportunity to a partner, one or two of the CyMVectin CMV program. So you know, there are a variety of opportunities, and plus you know there are always these animal health opportunities. So we have a lot of irons in the fire right now. It is hard to predict, which ones are coming to fruit. That is the reason that qualifying statement was in our press release today. Alan Carr – Needham & Co.: So your assumptions for revenue aren't – there's nothing that is spectacularly different from the 2009 levels that we saw in terms of revenues?

No, as you see and if you go back and look historical, our revenues have been in the last six, seven years in the $10 million to $15 million range. Alan Carr – Needham & Co.: Okay, and then –

However, having said that this year there is a larger emphasis on revenue from collaborations than in prior years. In prior years they have been larger emphasis on contract manufacturing, which has been a larger component. Alan Carr – Needham & Co.: Okay, and then with the Allovectin-7 program moving along, congratulations on finishing the enrollment, can you go over the commercial strategy for that one?

I think the commercial strategy is pretty straightforward. I think we really want to partner it outside the United States, meaning primarily in Europe, because we really don't have a lot of European presence as it is required to be a good company that can file. We don't have a lot of regulatory expertise. We have conducted trial in probably most European countries. In the United States, we would like to commercialize it on our own because we have spent a lot of effort developing it. We think it is an easy product to commercialize because nothing has been approved for melanoma for a very long period of time. But obviously, it all depends on what the commercial partner on the other side wants to do. So we're open for a broad set of collaborations or a narrow set of collaborations. As you know, we have already – have a collaboration with Teva in Israel and with a company known as Eczacibasi in Turkey. So we have already started that effort. Alan Carr – Needham & Co.: Okay, great. Thanks very much.

Ren Benjamin of Rodman has our next question. Ren Benjamin – Rodman & Renshaw: Hi, good morning and thanks for taking the questions. I guess just going back to something Alan had mentioned regarding the burn, can you just tell me what the net burn for 2010 is then?

For 2010 or 2009? Ren Benjamin – Rodman & Renshaw: For 2010, because you had mentioned $20 million to $24 million, which encompasses the potential revenues from partners or potential partners. But what is the operating expenses, I guess, that you –?

I think your question is what – the reason we have not given. Normally we give a burn and a loss, because – and the loss is missing from this year’s earnings statement simply it is because if the revenue comes in, depending on how the revenue is structured, the treatment of the revenue and calculation of loss is different according to how the agreement is structured. That is why we have just given the burn rate. But the burn rate – net burn rate is the 20 to 24 is what we are seeing. Ren Benjamin – Rodman & Renshaw: Okay, okay, looking at Allovectin-7, maybe my timing was off, but the enrollment appeared to complete on time. I thought that data would be available on 2010, but I thought on the call you mentioned that the database would be locked by mid-2011.

Well, the trials calls, first of all you can’t lock the database, because you have to – the last patient has to cover at least six months before you can lock the database. That is the minimum. But the SPA calls for a minimum of 10 months of follow-up, 12 months of follow-up. So theoretically the trial can be complete at the end of 12 months, assuming all the patients are off the steady, but knowing how the study is going, we believe that patients are going to be beyond the 12 month point. That is why we are kind of predicting, now if all the patients are done at the end of 12 months the lock will happen sooner. Okay. So it is hard to predict. So it is all on an event base, and we want to lock the database so that we have both the response rate data and the survival data at the same time so they can all be captured when the database is locked. Fortunately for us, survival also will come in handy because the trial had started almost in what – 2007, right. So it is almost 3 years. So we should be able to lock the database at the same time when both the response rate and the survival data matures. Survival data as you know, you need to have at least 50% of events occur for the database to be meaningful. So it is hard to predict at this stage, but as we go quarter-by-quarter, we will be able to give you a better granularity in terms of how the trial is going, and when we can be in a position to tell you what that exact date is. Ren Benjamin – Rodman & Renshaw: Can you remind me, Vijay, if there are any more DSMB meetings and when the next one might be?

Remember, there is – it is an SMB. There is no DSMB. And yes, there are going to be, I think potentially one or two DSB meetings, and they will be reviewing safety, but as I mentioned in my call, there would have been three safety reviews so far. The safety profile is good. There have been not a single grade 3 adverse event related to the drug. Ren Benjamin – Rodman & Renshaw: And so the next one, is that – is it more spread out now? It will be in six months, probably midyear or something along those lines?

I think it is another six months from now. Ren Benjamin – Rodman & Renshaw: Got it. Okay. Regarding the CyMVectin trial, the IND has been allowed. What is – it seems to me that you guys have the funding. You have the cash and wherewithal to move this program forward. What's it going to be sort of moving forward? Is there enough interest right now that you want to pursue a partnership this early? Why not just start a clinical trial as soon as possible, and what would that clinical trial look like?

Let me explain to you first of all, we are first of all very excited with the CyMVectin program simply because this is the last big target, okay, after Gardasil, okay, in HPV for adolescent females. Okay, this has caused – it is a major task of birth defects in females who are CMV negative. So it is a huge market. Having said that, the Phase 1/2 trial can be small, but the real efficacy trial, which would require CMV disease in infants is going to be much larger trial, where we need a partner, and that is why instead of trying to rush into doing this trial, we are looking very carefully to share our both CMV TransVax data, as well as the fact that we are CMV IND to potential partners who can look at the immunogenicity data from the CMV TransVax trial, and the fact that we have an IND in hand with a terrific trial design, which I will cover in a minute, which gives us incentive for the other companies to see, hey, whether we want to fund the program. Because with a big pharma, you want to make sure they are at the ground floor level when you start the trial, so you don't end up repeating a whole bunch of activities. So we are in discussions with everybody. We don't have sufficient amount of money to do all what we're doing, including taking TransVax to Phase 3, and completing the Allovectin-7 trial. So what we don't want to do is start the trial and leave it hanging out there without, you know, having the sufficient funds till we reach some critical milestones. In terms of the trial design, our trial design is really a proof of concept study. It is a Phase 1/2 study. Our concept really is to go to a naval base, where there is a day care center or some other particular place, and do a study where kids are in the day care center, who actually shared a lot of CMV, and then inject both arms, where the mother is a CMV negative and see the infection rate. Okay, that is the concept of the trial design. It is a very unique trial design. Ren Benjamin – Rodman & Renshaw: And so then it's just fair to say that this program will not move forward without a partner? Is that –?

No, we have not said that. I think we need to – we want to be careful. We want to make sure we make an attempt to find a partner. Remember, we're going to get some very pivotal data coming on CMV TransVax in the middle of the year. That is going to lead to spending a lot of effort on getting that program. We want to marry both these programs, but keep them independent at the same time. Marry them from a data integrity perspective, because they are basically, fundamentally the same pathogen that we are working on, but I have not ruled out the fact that they will do would without a partner. Ren Benjamin – Rodman & Renshaw: Got it, thank you very much.

We will go to Cowen & Co.’s Craig Gordon. Craig Gordon – Cowen & Co.: Hi, good afternoon. A couple of questions, first on Allovectin-7, when you do lock the data mid-2010, do you think you will also have survival data or is it more going to or should we expect durable objective response rates solely in the primary endpoint?

I think our goal is, when the lock the database we will have both components locked in at the same time. Craig Gordon – Cowen & Co.: Okay, great. And on the –

Remember Craig, you know, we have an ASP [ph], objective response rate, which we think we have a terrific chance of meeting given our Phase 2 trial data. You know, survival in the end trumps, and we want to make sure we capture the survival data. So, we don't lock the database once. Because once you lock the database, then that database subsequently is meaningless from an FDA perspective. So whenever you are going to announce the data, you need to make sure both the attributes are locked at the same time. Craig Gordon – Cowen & Co.: Okay, great. And then in terms of H1N1, have you had discussions with the Navy yet pending the data from the Phase 1 whether – how eager the Navy is to move into Phase 2?

The answer is you know, obviously, the Navy is – remember the entity that I mentioned in the call, TMTI, which is the Transformational Technologies group, whose charter is to develop all these countermeasures, and H1N1 is just part of the charter. There are lots of other emerging pathogens they want to work on. And this is really a trial case for us to demonstrate, hey, can we make a vaccine quickly using our technology platform, and hey, we can develop immune responses, which meet the standards that are prescribed by the FDA. If that occurs, we could get funding for other pathogens as well as maybe for this Phase 2 trial. But right now, our goal is to get this money. We are almost there. Unfortunately with the flu blanket, some of the paperwork has been held up, okay. Craig Gordon – Cowen & Co.: And I'm not sure – I may have missed this, but I just want to make sure, AnGes, what is the status of their approval in Japan?

I think we are awaiting it as patiently as you are. The Japanese agency, as I have told people is notoriously slow. We're going to find out hopefully in this quarter, whether they are going to get approval or they are going to be asked to do something else, but I have no idea in terms of why it takes that long in Japan. Our partner remains optimistic. Craig Gordon – Cowen & Co.: And what is – have you and AnGes talked about when AnGes plans on launching their Phase 3 in the US?

They – their current plans are to do the study sometime this year. They are in active discussions with both US companies and Japanese companies to help fund that trial so that co-development with those companies. Okay. So those conversations are ongoing. But their intentions are to start this year. Again, as I mentioned too, with our own dilemma with CMV IND, if they want to get this Japanese approval in Japan behind them before they embark on a US trial. Craig Gordon – Cowen & Co.: Okay, great. Thank you very much and feel better.

(Operator instructions) We will go next to Stephen Willey of Thomas Weisel Partners. Stephen Willey – Thomas Weisel Partners: Hi, good morning, guys. Just wondering if you could maybe tell us when we get the TransVax data kind of mid-2010, will you have had any discussions with the FDA around what a pivotal trial might look like with respect to endpoints and anything like that?

The process there is very straightforward. You know, first of all you need to get to the end of Phase 2 data and the database is to be locked up, cleaned up, then you request a Type C meeting with the FDA to discuss the endpoints. So that will occur after that data is in hand, and before we have the Type C meeting, we need to make sure the worldwide CMV experts are lined up behind us, in terms of the endpoint that we are proposing will be acceptable to the FDA, because really the guys who run – who understand CMV most are the CMV clinicians who treat these patients. So we're working on behind the scenes in getting that occur. Following that Type C meeting and once the endpoint is locked, we will have an end of Phase 2 meeting, where we present a Phase 3 trial design. And those are all planned. We haven’t publicly disclosed those. But that will not occur before the data is closed. Stephen Willey – Thomas Weisel Partners: So at this point are you really kind of looking at the outcome of that Type C meeting as kind of being the gating factor as to –

No, I think we're pretty confident in terms of how that Type C meeting is going to go because, we have been working with lot of experts in this field. So the Type C meeting is a formality to kind of make sure. You want to have a Type C meeting so that you have one – that way you get one audience with the FDA. Then you again get the second audience with the formal audience with the FDA at the end of Phase 2 meeting. So those are two different opportunities to kind of reinforce the same points. Stephen Willey – Thomas Weisel Partners: And then I know that AnGes portions of the Allovectin-7 funding has kind of come to an end here. And maybe, Jill, if you can just kind of talk about how that impacts – I guess, I know you gave us kind of a net cash burn number, but maybe how that impacts kind of R&D in 2010. And then maybe more importantly in 2011 when you guys prepare to potentially file.

Well, for 2010, we have built that into the forecast. And their funding covers the Phase 3 trial, and as that is now winding down in 2010, and we're in the data collection mode, we have less expenses from the outside, trial expenses. So that is a reduction basically in our spending rate.

But however, the data collection, the CRAs, the outside database that we employ, getting ready for the endpoint adjudication, all those expenses are reflected in this burn rate, which we have given. Stephen Willey – Thomas Weisel Partners: Okay. Thank you very much.

Thanks, Stephen.

There are no further questions at this time. I would like to turn the conference back over to Mr. Samant.

Thank you very much. We look forward to seeing you again at the next quarter's earnings call. This ends our call.

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