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

Alan Carr – Needham & Company Stephen Willey – Thomas Weisel Partners Ren Benjamin – Rodman Eric Schmidt – Cowen and Company Nathan Cali – Noble Financial

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 will now turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, sir.

Hello everyone. Welcome to our first quarter 2010 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 forecasts. 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 first 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 everyone in our call today. I'll cover some highlights in perspective for our recent development and give you outlook for the reminder of the year. We'll then open up the call to questions from our invited participants. First, Jill Broadfoot, our CFO, will review our first quarter financial results. Jill?

Thanks, Vijay. Financially, we had a solid quarter in line with expectations and with past performance. We generated revenues of $1.5 million in the first quarter of 2010, compared to $2.3 million in the first quarter of 2009. Operating expenses were $10.1 million in the first quarter of 2010, compared with $10.6 million in the first quarter of 2009. The net loss was $8.5 million in the first quarter of 2010, compared with $8.2 million in the first quarter of 2009. Our net cash used during the first quarter of 2010 was approximately $9 million, which was offset by the $3 million of capital raised through the exercise of all remaining warrants. Our net cash used for the first quarter was consistent with our prior projections for the full year, which include anticipated receipts from new or expanded partnership not currently contracted. We ended the first quarter with cash and investments of approximately $48 million, which is sufficient for our anticipated needs at least through the end of 2011. With that, I will now turn the call back to Vijay.

Thank you, Jill. I'll start today with an update on our Allovectin-7 immunotherapy for patients with metastatic melanoma. First, I want to highlight the importance of the recent approval of Dendreon's Provenge vaccine for prostate cancer. This long awaited event is a victory both for cancer patients and for those who are developing novel therapeutics to treat them. We believe our fast pace through the approval process should help cancer vaccines and immunotherapy in general. And if all goes well, our own Allovectin-7 should be among the first -- among the next candidates up for consideration. In Jan, we announced completion of enrollment of 375 subjects in our Phase III registration trial, but we still had a number of patients who were in screaming at the time. As a result, we actually enrolled 390 subjects by the end of Feb. This is important for a couple of reasons. First, just highlight the enrollment momentum we saw at the back end of the trial and this pattern shows continued interest by investigators in getting access to Allovectin-7 for the patients. Since this study is not blinded for physicians, the momentum suggests that their experiences with prior patient study may be encouraging. Jill?

That candidate illustrates the importance of not closing the trial database too soon. Since we enrolled half of the total subjects in the last ten months of the enrollment period, it is likely that half of the responders will be identified in the last ten months of follow-up. We want to make sure we continue the trial long enough to capture all of these responders. An important additional benefit of keeping the trial open is that we can reasonably expect survival data to mature within the same timeframe as the final response rate data. We expect to lock the clinical trial database in mid 2011 as we gain further clarity by monitoring trial progress over the coming months. We will provide periodic updates and timeline. Before our next conference in August, we also expect to have the results of our net safety monitoring board review.

Next, I'll review the recent progress in our CMV vaccine programs. We are ramping up collection of the audit final date of our Phase II of our TransVax therapeutic vaccine for transplant patients. Data analysis should be complete by late summer and we'll announce the results at a suitable forum in the third quarter of this year. Just to remind you, the data will include all key virological end points after four injections and 12 month follow-up. Just to recap the trail background, this trail was conducted in stem cell transplant recipients. These patients are assuming transplants to restore their immune systems after immunobladder treatments for their primary leukemias and lymphomas. In short, these are very sick patients with minimally functioning immune system and they have one chance at success with their transplant procedure. The only enrolled patients who were CMV zero positive, as they are at the high risk for CMV reactivation during their recovery period before their new immune system becomes fully functional. Our TransVax vaccine is intended to reduce or eliminate the need for toxic and expensive anti-viral drug therapies currently used to control CMV during this period of vulnerability. CMV reactivation in this patient population typically peaks within the first 100 days after the transplant procedure and between 6 and 8 months. So it's very important, the amount of sufficient immune response early in the recovery period to sustain it through the second day [ph]. We recently reviewed the preliminary immunogenicity data for our TransVax vaccine versus placebo through 12-month follow-up in our phase II trial. We were pleased that our vaccine was able to enhance both T-cell and antibody responses to the encoded CMV antigens and to sustain those responses at through 12-month analysis. We also saw an encouraging boost in both T-cell and antibody responses after the fourth injection which could prove very important in controlling late onset CMV reactivation. Anyone interested can remove this data in the CMV section our website. We look forward to seeing the final results with a full evaluation of viral load and clinical endpoints in the third quarter. Our second CMV vaccine 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. The FDA, I'm pleased to say, has allowed our Phase I IND for CyMVectin and we are exploring collaborative opportunities for further development and commercialization. We are among the leading developers of CMV vaccines to address the serious unmet need of those at risk from this virus. We believe the CMV franchise has the potential to add significant value to our shareholders. Next, I’ll discuss our pan flu program. The recent pandemic clearly demonstrated the limitations of the established vaccine approach. This was a close call. We may not be lucky the next time around. The H1N1 was a mild pandemic. It also provides an opportunity for us with these pandemics to demonstrate the potential of our technology. Since our last conference call, we received a commitment of funding from the U.S. Navy through the Henry Jackson Foundation to conduct a Phase I trial of our HINI influenza vaccine. This funding supplements the earlier funding provided by the U.S. Navy and the Department of Defense Transformational Medical Technologies Initiative or TMTI. Together, these department agencies are working to protect our military forces against future pandemics -- against future pandemics and other biological threats. We just announced the initiation of the trial yesterday. It took a long time to get the funding from the Navy but I wanted to provide a brief description of the trial design and our timeline moving forward. This is a small study. It’s a double-blinded placebo controlled study with about 20 subjects getting the vaccine and 10 of the volunteers will be getting placebo. We’ll be evaluating a single gene vaccine and coding the HI hemagglutinin from the California 0409 strain. The vaccine will be formulated with our Vaxfectin adjuvant and will be dosed at 1 mg. We’ll dose at day 0 and day 21 and we’ll be collecting data on tolerability and immunogenesity. We should have our preliminary immunogenicity data from the 21-day follow-up before our next conference call. We’ll continue to track the subject to six months to evaluate the long-term immune responses and the sustainability of the antibody responses. This Phase I trial allows us to build on the success of our previous H5N1 vaccine trial with a second pandemic flu target, and further demonstrate the potential of our technology as it relates to speed and immunogenicy obviously. We’re also expanding the human Phase III database for our Vaxfectin adjuvant and establishing a platform for emerging disease vaccines for potential future use for rapid protection of approximately 3 million U.S. military personnel. We are excited to get this trial underway and look forward to seeing the data. Now, to the angiogenesis programs, which are some of the most exciting developments in our Vical’s partnered programs. Sanofi-Aventis is approaching completion of its multi-national pivotal Phase III trial designated as the Tamaris trial for advanced PAD with its FGF-1 gene therapy called Temusi. That’s the product name; Temusi. Sanofi has posted details about the Tamaris trial on the website and you may want to check it out through the link on the Vical homepage. The treatment and follow-up in this trial are expected to be complete in the third quarter and Sanofi expects to present data in the fourth quarter of this year. This product has the potential to be introduced in the market as early as next year. So we are very excited with how this partnership has developed. Our other angiogenesis partner, AnGes, which also funds our Allovectin-7 trial, is awaiting approval of its Collategene product in Japan. It has a special protocol assessment with the Japanese FDA; with the U.S. FDA for a Phase III trial in the United States. AnGes continues in track with the Japanese regulatory agency and is optimistic regarding the approval process. In summary, I’m pleased with the progress we have made this quarter. We’re advancing well in our independent and partnered program and are looking forward to reaching some key milestones in the remainder of 2010. Let me highlight few of those. There will be a safety independent report on Allovectin-7 before our next conference call. We should have the final results in the third quarter from our Phase II TransVax CMV vaccine study and when we present that data, some of the key vital endpoints that we'll be presenting are the occurrence rate, which is the number of patients who reactivated at least once. We’d also be talking about recurrence of CMV [ph] infection; that is number of episodes of reactivation. The peak viral load comparison between the vaccine and placebo groups. The area under the curve which is the amount of reactivation over time and the anti-viral usage, both the amount of usage and the duration of anti-viral therapy. We should also have results from our Phase I H1N1 vaccine trial. Data from Sanofi's Phase III Tamaris trial. An update on approval of Collategene. We will be presenting in multiple investor conferences over the several weeks and hope we have an opportunity to meet with some of you there. That concludes our prepared comments. Operator, we are now ready to open the call to questions from our invited participants. Thank you.

Thank you, Mr. Samant. (Operator Instructions) A first question comes from Alan Carr with Needham & Company. Alan Carr – Needham & Company: Hi, good afternoon. Thanks for taking my questions. I got a few on TransVax. What’s the timing -- are we going to see one-year clinical data and when or in what form I guess should we expect to see this data presented?

Excellent question, Alan. First of all, let me remind you what data is going to be presented. We already presented the immunological data after the 12-months follow-up. This will be data after four injections and 12-month follow-up. And let me repeat what I said before. We will be showing the occurrence rate which is how many times CVD [ph] activation occurred in patients, the number of episodes, peak viral load, area under the curve and (inaudible) some other end points. We have not publicly announced but it will be sometime in the third quarter, we will probably present it at the (inaudible) one of the major conferences or if the timing doesn’t match, we will present the top line data in a special conference call, but stay tuned. Alan Carr – Needham & Company: Okay. And then how is the – how is the strategy coming along here in terms of partnering TransVax? Do you have discussions ongoing? Do you feel that this trial is enough to entice partnership or is there something else potential partners are looking for in terms of development?

No, I think the partners are all waiting for the final 12-month immunological end points because those are really critical end points and we are working very hard round the clock in gathering all the data and putting -- getting closer to locking the clinical database. Remember, these immune compromised patients and the fact that you’re amounting [ph] such good immune responses in this HIV like immune compromised patients and if he can translate that into virological end points, that’s a big risk here. I think that should be sufficient to convince some of our partners. The answer is, yes, we are talking to people; yes, people are waiting for the 12-month data. Alan Carr – Needham & Company: If you decide to bring this one along on your own, what would the cost be for Phase II trial?

Well, it all depends on the size of the trial and the size of the trial is decided on the definition of the end point. So I think, it’s hard for me to speculate in terms of what the size of the trial is. But, this is not a several -- a couple of hundred patients study is what our expectations are, okay. Because, remember, the reactivation rate is very high; almost 70% and we are validating that again in this particular trial. So you don’t need a huge database to get proof of concept. You really have to have a discussion with the FDA in terms of the safety database they require. That’s really going to drive the size of the trial, not the clinical end points to my knowledge. Alan Carr – Needham & Company: Yes. The end of the Phase II -- could you fit in an end of Phase II meeting this year or will that be next year?

We haven’t publicly announced but our thought process will be, first of all, we are pretty savvy when it deals with the regulatory agency; we will probably have type C meeting first to decide on the end point and then do the end of Phase II meeting. So we get two shots in terms of engaging the agency. Alan Carr – Needham & Company: Okay. Great. Thanks very much. Appreciate it.

Thank you.

Our next question comes from the Stephen Willey with Thomas Weisel Partners. Stephen Willey – Thomas Weisel Partners: Hi, thanks for taking the question. Circling back again to the CMV program, is there any more clarity with respect to whether or not you may have an end of Phase II data package submitted to the FDA before the data is presented at a conference?

No, I think -- as I said, the sequence of the event is we’ll probably present, not the end of Phase II but a package for type C meeting to formulize the end point for the phase III study because when we meet for the end of phase II study, we need to make sure we have the phase III design as well as the end point to find. So, our thought process is to get the end point to find first, get an agreement with the agency that’s the end point. So, when we go on an end of Phase II meeting, our engagement is much tighter and we get agreements in terms of what we expect to do. Stephen Willey – Thomas Weisel Partners: So presumably then, because you want to have an end point defined before that meeting occurs, then that meeting will not be a gating [ph] factor in kind of dictating the pace of a potential collaboration?

No. We have been working - we are working with experts, (inaudible) in terms of people who actually deal with CMV in a clinical setting day-after-day and those are the people including people who have done tremendous amount CMV work or helping us put together what was relevant that the FDA will accept. In the end, the FDA has to rely on the outside experts and if they don’t have internal expertise, they’ll call an expert committee, and fortunately we are dealing with most of the experts in the field ourselves. Stephen Willey – Thomas Weisel Partners: And then, I guess, with respect the H1N1 data, is there really any reason just given the similarity between that and the H5 program that we should see really anything materially different from an immunogenicity perspective?

Well, I think so because, remember, the H5N1 vaccine, the conventional vaccine required 90 microgram doses times two to get like a 40%, 50% sero-conversation. Whereas the Swine Flu H1 vaccine requires only 15 microgram times two; so you had almost a six-fold lower dose giving better sero-conversation. So we expect that, A, we should do better in terms of the sero-conversation rate that we saw in H5N1, okay. So the answer is, this is a very highly immunogenic pathogen, so we should see the same benefits that the conventional vaccine saw, even better with the DNA vaccine. Stephen Willey – Thomas Weisel Partners: That's interesting. And then, I realize that you guys pushed out some brief data with respect to a malarial vaccine and I know it’s kind of a small end. But really not knowing anything about malarial vaccines, just wondering if there is anything that we can kind of benchmark those response rates to?

Well, it is. I mean, it’s an amazing response and you have sporadic data coming out on malaria saying that, you got partial protection, you’ll see the big pharma companies, but that’s remarkable data because it’s not a fully optimized set of constructs and the kind of still [ph] challenge protection they got and I don’t know what the numbers were, they were small numbers.

4 out of 50.

4 out of 50, that’s pretty good. The best protection rates that people have got, I don't know, high ‘80s or ’90 when they use irradiated spores like is not [ph] the gold standard. Unfortunately, that's not a practical way to develop a vaccine. Is it up close to the irradiated spores (inaudible) but it's a step in the right direction, okay. And this was done only with two injections. The Navy is using it, and they are going to be developing, spending further time on it. So I think it also helps us in terms of expanding the validation of our technology. Stephen Willey – Thomas Weisel Partners: Okay. And I believe in Trial 2 there was also really no relationship to antibody titers, despite the fact I think three out of four, protected patients had T-cell responses.

Yes, Malaria is a parasitic disease. There are various stages of the plasmodium. There is the blood stage. There is the lever stage. And people have never really been able to correlate, immune markers with protection. It's not for the lack of trying. So this is –people have been trying to develop vaccines for a long time. So that's not unusual. Stephen Willey – Thomas Weisel Partners: Okay. Thank you. And congrats on the process -- of progress.

Thank you. Appreciate that, Stephen.

Our next question comes from Ren Benjamin with Rodman. Ren Benjamin – Rodman: Hi. Good afternoon and thanks for taking the questions. Could you give us – can you describe for us the cellular and antibody responses that you saw through the 12 months? Were there any statistics that were done since you have a placebo arm, whether it is statistically significant or close? Can you just give us more details regarding that trial, the data that was just presented?

Yeah. I think so. The data's on the site. Allan, you want to comment on that?

Yeah. I think that's probably the best thing to do, Ren, just take a look at the website because we've got those slides from that presentation up there and the details.

And the 12 month, but they are statistical or significance particularly on the T-cell responses, if I recollect okay.

We did not put p-values, because these are preliminary and they will be updated along with virological data that we come out with at the end of our --

Yes, I jumped the gun. The data is good or we wouldn't have put in on website, but we will indeed when we present that data in the third quarter. The whole package will be updated, and give the p value. Ren Benjamin – Rodman: Got it. And then – after the H1N1 trial is completed, presumably it's going to be fairly quick. What are the next steps for a program like that? Do you secure additional funding to move on to a larger study? Do you then apply, you just apply for some sort of expedited regulatory approval, what are the next steps?

This is a question that I wanted to ask. This is like the Meat Loaf song, you took the words right out of my month, okay. Let me tell you why we are doing this program. And the other way to ask the question is, 12 months have gone, the pandemic influence has come and gone, why Vical doing this study? And the reason we are doing this study is first of all, the entire funding for the study has come from government sources for us. It allows us to expand our database both on safety of Vaxfectin and validation of the technology. But more importantly, the monies have comes from TMTI, which is the Transformational Technologies Initiative. And their goal is to vaccinate 3 million American military personnel, okay, from emerging pathogens. They are not concerned about Swine-Flu and pandemic flu. That's where HHS comes in for the general population in terms of stock piling. Here, they are looking at emerging pathogens. And what they want from us is a proof-of-concept that can we translate the speed with which we made this vaccine and done animal data. Can we translate that animal data into humans? And if that translates to humans, then we'll get a chance to work with them on these undisclosed pathogens, where their goal is to make 3 million doses in bulk and put them away. And so, when that pathogen emerges, then the regulatory process starts. So it's a pretty clean kind of concept, okay, as opposed to relying on a BARDA grant where you are tied for six-seven years on HHS grant, where you bought [ph] the entire company. And 3 million doses for a company of size at a bulk level, which is a reasonable kind of target that we can deal with as opposed to trying to contract it to third party. So our goal is work with TMTI on emerging pathogens. Let the big boys go and stock pile this pandemic influence of vaccines, because that's not in the cards at this stage. Ren Benjamin – Rodman: And so, okay, so just going forward with this thought process, what is the sort of economic that can be generated from this? I would imagine that there will be a lot of negotiations, but maybe there is so much money for the – that, you can charge more pharmaceutical type prices and end up here in very good margins?

Well, I think the logical pathway would be if this trial pans out the way it ought to be and the data comes out in terms of immunogenicity, the antibody levels, and the sustainability of the antibody levels, the next step would be to work on one such pathogens, go to the same process again, run a Phase 1 trial and demonstrate that we can mount immune responses. This will be funded by them. And if that occurs, at the end of that, you need to negotiate with them for price per dose and make the stock. I can't speculate at this stage. But take a look at what the government has paid even for companies like Sanofi and GSK and others. Those are pretty reasonable prices, okay. For a company of our size that kind of pricing environment of $20 to $30 a dose at bulk level would be very lucrative. Ren Benjamin – Rodman: Got it. Thank you very much and congrats on the quarter.

Thank you, Ren. Nice chatting with you.

Our next question comes from Eric Schmidt with Cowen & Company. Eric Schmidt – Cowen and Company: Good morning, guys. Vijay, just couple more questions on TransVax. Could you remind us, with regard to the 12 months update, whether this study is anyway powered to show recurrence weight differences or whether it's still at numerical maybe separation?

Each of the attributes and some attributes indeed is powered and some attributes is not powered, but our goal is to show you p values across all those when the data comes, not just numerical differences, but trends that we showed you last time that the Street analyst and the pharma companies judge. But I think we feel that, of the key endpoints, we should get some significant differences between placebo and vaccine and show statistical differences. Eric Schmidt – Cowen and Company: Okay. And then in terms of your partnership discussions, is there a type of collaboration you are now shooting for, are you still thinking about maybe separating the two CMV indications or we’d just like to (inaudible) program and so that, maybe you can talk?

Yeah. I think, clearly the individuals who are interested in these CMV TransVax program are completely different set of companies and people who are interested in these CyMVectin program, people who are interested in CyMVectin program obviously are the people who have the sources to go the long way. People who are interested in the TransVax kind of program are mid-size companies who go after orphan drugs, because it’s kind of an orphan kind of indication, there are a fixed set of patient population. We’re also looking for companies who will have strength in Europe because we would like to do the trial also in Europe. Because remember, our trial right now in TransVax is US centric and if we can get an opportunity to do this trial in Europe, that would be great and that will allow us to (inaudible) Phase III trial factor. So they are different entities. Is it possible that there will be a single entity interested in both programs? Maybe. Right now, our pathways in terms of talking to these -- for these commercial opportunities are two different set of groups. Eric Schmidt – Cowen and Company: Is one set of discussions more advanced and does the TransVax data kind of provide you with…

The TransVax data is going to also provide us leverage of the CyMVectin program because here you are showing, in immune compromised patients, immune responses both T-cell and antibody responses, which kind of gives anybody looking at CyMVectin hope that indeed what we are seeing, along with by the way the H5N1 flu data which is antibody immediate data and the upcoming H1NI data, all those three data package will help CyMVectin, but the CyMVectin data -- the TransVax data is based on the TransVax actual data that will come out in September. Eric Schmidt – Cowen and Company: So, should we expect the TransVax partnership before anything on CyMVectin?

It's hard to predict how these partnership discussions go on. I can tell you there is a reasonable interest right now. If I have something to announce, I would have announced it, but we're not there yet. Eric Schmidt – Cowen and Company: Okay. Thanks a lot.

Thank you.

(Operator Instructions) Our next question comes from Nathan Cali with Noble Financial.

Go ahead, Nathan. Nathan Cali – Noble Financial: Hi guys, good afternoon. Thanks for taking the question. I had a couple of questions that already were answered. But, on your ONCEPT canine vaccine, is there an expected market opportunity there and are there any other currently marketed vaccines?

So the answer is, there are no vaccines in the melanoma to my knowledge. This is the first therapeutic vaccine approved in the history of the mankind, either for animals or humans. It got approved before pro-1 [ph], so if they -- ground breaking approval, okay. I don’t think there are any melanoma vaccines for dogs to my knowledge. I think the launch is proceeding well. We don’t have the significant experience yet but I would say, by the end of this year, we should have general idea how the penetration is going. It has also been launched in Europe from what I understand in few of the select countries. So I think we’ll find out how this proceeds. Nathan Cali – Noble Financial: And a question that you may not have the answer to yet but, on CyMVectin, any expectations for Phase I, when that may start?

No, I think – as Eric Schmidt's question before, it is our focus right now. We got so much on our plate. We got Allovectin-7 data collection; we got TransVax in terms of both the data collection, the strategy with the FDA; we got the swine flu study going on and we're not going to start on the new study. We want to make sure we manage our finance as well. And therefore, we would be looking actively for partnering that program and again that is dependent on the quality of the data that we come out with in the third quarter of this year. Nathan Cali – Noble Financial: So you would probably partner that before you start the Phase I?

That's our goal at this stage. Nathan Cali – Noble Financial: Okay. And being that you guys have gotten some pretty good results from TransVax and those patients are immuno compromised, would you expect some better results in CyMVectin since those patient population will be a little bit different?

Yeah. Those are healthy volunteers. It's also antibody immediate response, so Vaxfectin is a different adjuvant, so it is a completely different modality and you know, if our H5N1 and our swine flu vaccine which is just getting into clinic, the data from both that is to be translated to CyMVectin, we should expect very good results. Hopefully better than what people have gotten with the protein-based vaccine, just published in the New England Journal of Medicine, so you can look at the responses there. Nathan Cali – Noble Financial: Okay. Thank you.

Thank you, Nathan.

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

Thank you all for participating. We hope to see some of you individually at one of our scheduled presentations for the next conference call. Thank you.

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