Alan Engbring - Executive Director, IR Vijay Samant - President & CEO Jill Broadfoot - SVP, CFO & Secretary

Alan Carr - Needham & Co Eric Schmidt - Cowen & Company Steven Willey - Stifel Nicolaus Reni Benjamin - Rodman & Renshaw

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.

Hello everyone, welcome to our second 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 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 second quarter 2010 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 and welcome to all our listeners I’ll review the highlights of our recent developments in our call today, update our outlook for the remainder of the year and will then open the call to questions from invited participants, but before I do that let me have our CFO Jill Broadfoot to give you financial update for this quarter.

Thank you, Vijay. Financial results for the second quarter and first half of 2010 were consistent with expectations. Revenue for the first half of 2010 was $3.5 million compared with $6.2 million for the first half of 2009 reflecting the reduction in revenue recognized from AnGes as we approach completion of our Phase 3 Allovectin-7 trial. Last year’s revenues also included a $1.5 million milestone payment from Merck for its cancer vaccine program. Operating expenses were generally consistent year-over-year and net loss was $16.9 million in the first half of 2010 compared with $14.3 million in the first half of 2009. We ended the first half of 2010 with cash and investments of approximately $40 million. Our cash used during the first half was approximately $18 million which was partially offset by inflows of approximately $5 million from more exercise which was consistent with our projections for the full year. As a reminder, our forecast range included anticipated cash receipts from new or expanded partnerships not currently contracted. We continue to make progress towards those potential partnerships. With that I will turn the call back to Vijay.

Thank you Jill, I will cover the highlights in our development programs today beginning with an update on Allovectin-7 immunotherapy for patients with metastatic melanoma. The recent approval of [Provenge] coupled with BMS’s second line melanoma data [task] therapy has created additional visibility for immunotherapy. I won’t go in to details about those data, but want to make a few observations. First on safety, in our Phase 2 trial, there were no drug-related Grade 3 or Grade 4 adverse events, there were no discontinuations due to tolerability. We believe that’s more impressive when you consider the average of patients enrolled in that Phase 3 was 60 and we treated several patients in the 90s. In our ongoing Phase 3 trial and Independent Safety Monitoring Board recently completed fourth scheduled safety analysis and recommended continuation of the trial for protocol. We believe safety profile of A-7 if it receives marketing approval would make it a compelling choice especially for patients who are not able tolerate toxic chemotherapy or biotherapy agents. Second on efficacy, our Phase 3 trial was designed under an SPA to support approval as the first line therapy. We are comparing A-7 head-to-head against the chemotherapy standard of care. We believe our primary endpoint of response rate at 24 weeks or more would represent the meaningful benefits to patients. We will also evaluate survival of the historical chemotherapy controls have been typically demonstrated median survival of nine to 12 months. A-7 achieved a median survival of almost 19 months in our Phase 2 trial. If we reach our accepted goals in Phase 3, we believe A-7 would be an attractive treatment option for metastatic melanoma. So on approach, while both EP and A-7 of immunotherapies that rely on different and potentially complementary mechanism of action, A7 is designed to make tumor cells more visible target for destruction by T-Cells, EP is designed to reactivate T-Cells that have been down regulated by cancer, both products because of their unique mechanisms would have the opportunity to address significant unmet need for patients with metastatic melanoma. As a reminder we completed an enrollment on our Phase 3 in February with a total of 390 subjects. We expect to log the clinical trial database in the second half of 2011, as we gain further clarity by monitoring a trial progress. Over the coming months, we will provide you periodic updates and timelines. Next I'll review the status of our Phase 2 trial for our TransVax CMV Vaccine. As we have noted previously these are primarily leukemia and lymphoma patients receiving transplants. We enrolled CMV-seropositive patients who are at high risk for CMV reactivation during the recovery period, our TransVax Vaccine is intended to reduce the need for toxic and expensive anti-viral drug therapy used to control CMV while the patients’ immune system is being restored. There are three important datasets to consider in our Phase 2 trial and pay attention to this very carefully. The first as in most trials is safety. We had a clean safety review early in the study. There were no serious safety issues that prevented us from completing the trial per protocol. As part of our final data analysis, we'll be comparing the full safety profile of the TransVax vaccine versus placebo. In our last quarterly call, we received the second dataset which is immunogenicity for our TransVax Vaccine versus placebo through the final 12 month follow up. These data have been presented on our conference in the April and are available in the CMV section of our website. We are pleased that our vaccine was able to elicit sustained T-Cell and anti-body responses to the encoded CMV antigens. We believe this is the first time a vaccine has demonstrated success in immunocompromised patients. We also noted a boost in both T-Cell and antibody responses after the fourth injection which is relevant for the late onset of CMV reactivation. The third dataset involves efficacy. We are evaluating a broad range of possibilities in this endpoint defining study, our four-month interim analysis last summer which is available on our website started to help us focus on the most important virological endpoints such as time to initial viremia duration of viremia, the number of viremic episodes and peak viral load. Our goal for the 12-month analysis in the crux of this study is to complete that process and identify the most relevant efficacy endpoints for a Phase 3 trial. We look forward to presenting the final Phase 2 data and we’ll announce the presentation details when they are confirmed. We’ve been working with the leading CMV experts and transplantation experts throughout the Phase 2 trial and we have enlisted their help in designing an appropriate Phase 3 trial. We expect to review our proposed trial design with the FDA as soon as possible in order to secure the necessary approvals to allow us to begin a Phase 3 trial next year. I will shift now to our Pandemic Influenza program, our ongoing Phase 1 trial of our H1 vaccine has been supported by funding from the US Navy and the Department of Defense’s Transformational Medical Technologies Program or TMT. This trial expands on the success of our H5N1 vaccine. Enrollment in this trial took longer than expected primarily because of higher than percentage of our volunteers tested positive to the H1N1 influenza virus. Remember we just started the trial in the late second quarter and by that time the H1N1 flu season had swept through the US. So it was hard to find patients. However we were able to find enough healthy volunteers to complete enrollment and are now back on track with the trial progress. I am going to provide an update today on one of our most exciting pre-clinical programs, our vaccine for Herpes Simplex 2 or HSV-2. The last week at our Herpes conference, we presented pre-clinical data we believe were quite impressive. First a little background of the disease, HSV-2 is a Herpes virus which means by the way same family of CMV. It means once that you are infected, you are infected for life. After the initial sexually transferred infection, the virus resides in a latent state in the ganglia. Periodic outbreaks and general lesions lead to additional virus shedding a disease transmission. At least 40 million people in the United States are infected with the HSV-2 and about 1.6 million additional people are infected each year. About one out of six individuals of the US and one out of four worldwide is infected with HSV-2 by age 50, so it’s a really pandemic in the true sense. HSV-2 infection has also significantly increases the risk of acquiring HIV. There is no proved vaccine for HSV-2, patients are typically treated with antiviral drugs, but they are inconvenient, expensive and prone to drug resistance. Cost of treating HSV-2 in the United States are in billion of dollars primarily related to drugs and outpatient medical care. Better approaches are clearly needed to reduce the HSV-2 lesion’s shedding and transmission. A prophylactic vaccine encoding HSV-2 glycoprotein D antigen, by the way, it’s a DNA vaccine was formulated with our Vaxfectin adjuvant. It produced encouraging results in our pre-clinical studies. Let me summarize those for you. The vaccine elicited antibody responses in 100% of mice against encoded antigen. It protected 100% of mice against subsequent challenge of the lethal dose of live virus. It reduced viral shedding in mice both at primary and latent infection sites. It elicited sterilizing immunity in 80% of the mice as evidenced by no detectable virus after challenge, either the primary or latent infection sites. The therapeutic vaccine encoded glycoprotein D as well as HSV-2 tegument proteins and was tested in the guinea pig model. Compared with placebo, our vaccine significantly reduced the recurrence of HSV-2 lesion in animals with latent infection with a P value of less than 0.05. We are excited by the progress so far and pleased that the grant has been extended for another year. We intend to continue to develop this vaccine to address the significant and medical need. We will keep you posted on our progress. Angiogenesis programs, Sanofi-aventis has now passed the final 12-month follow up point in this multi-national pivotal Phase 3 of Temusi, the clinical trial is known as TAMARIS. It is a gene therapy for advanced PAD. This double-blind placebo-controlled trial enrolled more than 500 patients and was designed to expand the safety and efficacy database from the successful Phase 2 trials. Sanofi expects to present the data in the fourth quarter of this year and if all goes well, this could put this product in the market as early as next year. In conclusion we are advancing well on our independent and partnered programs and are looking forward to two important milestones before the year end. We expect to present final data from our Phase 2 double-blind TransVax CMV vaccine study in September. Sanofi, our partner for a long period of time expects to present the final results for the Phase 3 Temusi PAD trial in the fourth quarter. We’ll be presenting at multiple investor conferences throughout the fall and look forward to seeing some of you personally there in the future. That’s concludes our prepared comments. Operator, we are now ready to open call to questions from our invited participants. Thank you

(Operator Instructions). And our first question comes from Alan Carr, Needham & Co. Alan Carr - Needham & Co: You mentioned earlier that when you were talking about burn, Jill that you all were factoring in potential partnership revenue. Can you give us a sense of where things stand with and the various programs that you are seeking to partner in and the extent of revenue that you are expecting from these partnerships this year?

Well, it’s a excellent question Alan, obviously we had an active discussion, but we don’t have a partnership in hand, because if we had one we would have told you. The revenue projections that we have included in our burn rate are not so huge that it is going to blow our burn rate out of line if we don’t accomplish this particular partnership goal. I think the issue is not whether we are going to accomplish the partnership goal Jill, but the timing of when that’s going to occur. Good probability, it may occur before the end of the year and it doesn’t occur, it may shift one quarter, but independent of that we have sufficient cash. Alan Carr - Needham & Co: Okay and then thanks for going over the HSV-2 program, when do you think this one might move into the clinic?

Well as I said in my formal presentation that the grant has been extended for one year. That means we want to do some additional work. We want to put the program through some additional stringent challenges, fine tune the make up of the vaccine to make sure even further improve on the data that we have gotten. So I think sometime in the second half of the year, we should be in a position based on the data to decide how where we want to take this program, but the data so far is very encouraging and HSV as you know as. The data that I kind of mentioned and I hope you guys captured it, one out of four individuals in the world is infected with HSV-2 and those numbers may understated, so this is the pretty nasty part. Alan Carr - Needham & Co: Anything new on Collategene approval in Japan?

I didn’t mention anything specifically, not that we haven’t heard nothing new, and the outcome of that is certainly in hands of the Japanese regulatory authorities. Our partner has told they are going to hear it sometime in the second half of this year, so we wait patiently for the outcome. Alan Carr - Needham & Co: And just sticking to the guidance of the second half this year?

Yes, it better be because it’s been going for sometime, there are not that many patients for the agency to go through now and I think both they and the agency is under pressure to make a call on this.

Our next question comes from Eric Schmidt with Cowen & Company. Eric Schmidt - Cowen & Company: Just on the AnGes front, since we were discussing the approval with Japan. Is there any update on the Japanese study starting up?

The PAD study you mean? Eric Schmidt - Cowen & Company: Yes.

No, as we have said previously that they are waiting the outcome of the approval in Japan before embarking in that study because obviously that will be a pivotal point for them to even raise some more money for funding that study. They have sufficient cash to start the study, but they want to raise more money to get the study to its completion. So, I think those events are both tied from a science perspective as well as from a financial perspective. Eric Schmidt - Cowen & Company: Turning to your own pipeline and a couple of milestones, do you expect immunogenicity data from the H1N1 study this year?

Yes. I would say hopefully by second half of this year. Alain, what do we say?

Our original guidance was delayed because of the longer time to enroll patients, but we should have something out by the end of the year.

Fourth quarter we should have the data. Eric Schmidt - Cowen & Company: Okay, and then I know would you can't say exactly when the Allovectin results might be out, but is mid next year still a decent estimate there.

We should have some good idea going into first quarter, remember there are two issues in Allovectin-7? We have a minimum of 12 months follow up and that 12 months follow up ends in Feb? At that point in time if all the patients are off treatment, then it’s a matter of closing the database, but there are still a lot of patients on the study, then we are not going to close the database and continue to treat the patients because we want to make sure we get responders out, the study is blinded to us. So, I think by Feb of next year, we should have an idea of where we going to be and the second important point is survival, we want to make sure that when we close the data base, we also lock in the survival. So, I think at this point in time, middle of the year or second half should be a reasonable time but we will give you a better understanding in the first quarter of next year. Eric Schmidt - Cowen & Company: In terms of TransVax’s progression to Phase 3, is that a study that you could start on your own or would that be partner dependent?

We would love to partner the European component of it because the study that we have done so far is in United States and unlike Provenge where there are differences in terms of treatment modalities between US and Europe. The transplant modalities or the treatment modalities between US and Europe are pretty identical, so doing a study in Europe would allow us to recruit the study faster, would also allow us to get after the European market and that’s what our focus is right now, is to see who we can rope in to help on the European segment of the study. Can we do the study on our own. Right now, yes we can start the study, but obviously we need to raise more money to continue to study, but I think our efforts right now are focused on getting that CMV data out, particularly on TransVax to make sure the Is are dotted and the Ts are crossed for our September hopefully at a important meeting release and then the Allovectin-7 data collection which is really a top priority, but don’t forget and TransVax right, now we are in the process of developing our Phase 3 trial design. We are looking at approaches how to engage the FDA in terms of the end points for the study which we’ve not publicly disclosed, which we have been working with a whole bunch of experts and proceed with that and that itself is a task right now.

Next we will go to Steven Willey of Stifel Nicolaus. Steven Willey - Stifel Nicolaus: You talked about some of the endpoints in the TransVax trial are going to be a little bit complex with respect to some of the virological endpoints. Can you maybe talk about whether or not you feel a partner in the US, given the complexity of that trial design would want to be involved in these current discussions around trial design and anything you might go to the FDA with?

I think the first thing partner will want to see the data from the Phase 2 12 month follow up, and if that virological data is exciting, then all bets are off right because the devil is in the detail, it is all in the data. I can stand here and tell you virological endpoints are good enough, but if we can show immunocompromised patient that those virological endpoints indeed can be achieved, then you can get a partner excited. Secondly everybody knows that this is a slam dunk. Normally if you get a Phase 2 study done and if you can complete a Phase 3 study done with an agreed upon endpoint with the FDA and the vaccine is efficacious as we have seen so far. This is a locked up market, we’ve [awful] drug status. The people are getting as a matter of point cell transplants or CMV positive, they will take this vaccine okay. So there is not issue of market penetrability or unknowns about how to achieve the commercial goal. So those are two very clear, the third thing everybody knows that, CMV disease is not a valid endpoint because the entire treatment paradigm is based on virological endpoints and if the FDA is going to insist on doing CMV disease, it will require a huge trial and this will make the full program removed. And so everybody knows including the clinical experts who are working with us. Remember how they treat people, they used PCR or whatever local assays and they look at the number of [copies] in the blood every week. And then they put on an antiviral such as Ganciclovir. CMV disease occurs in less than 2% or 3% of the patient. So that’s not a relevant endpoint and that’s the goal and that’s the pieces and that’s the expert opinion that we are taking to the agency. I think the European agency on the other hand already understands the importance of our virological endpoints. We have to do some convincing to do with the FDA. Steven Willey - Stifel Nicolaus: So the ultimate goal then I guess pre-Phase 3 be locking down in SPA and with that make it easier for a potential partner to come on board kind of halfway through the process?

I think we would love to have the partner come on board after they see the Phase 2 12-month data. So they are part of the discussions with us, with the agency particularly in the trial design. Steven Willey - Stifel Nicolaus: Just with respect to AnGes, have you got any color on whether or not Collategene would be a bit of a restricted launch if and when it’s approved in Japan because the trial was our stopped so early and I know, we’ve seen this before in some of the previous Japanese Phase 3 trials that were stopped early. They typically have a pretty tapered, immediate launch following that?

The answer to that question is I don’t know, the Japanese are being quite mum on this issue. So we are awaiting, all we know is we are going to hear something in the second half of this year definitely. Steven Willey - Stifel Nicolaus: On A-7 spending, I believe you worked through all of the reimburseful expenses under the AnGes agreement correct?

We are still recognizing revenue from that and we’re recognizing that ratably over the end of the period of the trial, but there is still some that we are burning through.

(Operator Instructions). We’ll go next to Reni Benjamin with Rodman & Renshaw. Reni Benjamin - Rodman & Renshaw: Regarding the Allovectin-7 program, Vijay can you remind me how many more SMB meetings there will be and about how often are they going to be occurring.

I think every six month is when we have a meeting, so I would guess another two meetings at most. Reni Benjamin - Rodman & Renshaw: And just regarding the data set that will be presented in September. I am assuming that it will be around or at the [ICEC] conference and we’ve already seeing some of those data. So wanted to see if you can get to some specifics as to what new and additional data we would be looking, is it extended follow up and will P values will be associated with all the data that we are looking as coming up?

Let me remind the audience, first of all the data that we’ve presented so far is as follows, we presented safety data which was early safety look on the study. So we are going to show you all complete safety data in the entire 12-month follow up after the last injection. We showed virological endpoints with no P values only up to 4 months of our two injection, average is about two injection. Here we are going to show you all the virological endpoints by the way which are on our website. After 12-month follow-up with all P values. We are not going to hold anything back and we already presented the 12-month immunogenecity data. So that’s already behind us, so the real efficacy data 12-months follow up after all sets of injections will be covered such as all the virological endpoints that we covered at 4 months with P value. Reni Benjamin - Rodman & Renshaw: Can you just give us an update if there is one regarding the HIV vaccine and when we might expect completion of enrollment?

I think it’s a long program, the program is continuing as you know it’s the old VRC vaccine which kind of got slowed down because of the adverse data that came out of the Merck HIV trial. There are lot of plus points in the studies, so I would say the enrolment will continue through the end of 2011, middle of 2011 at least before meaningful data comes out sometime in 2012, 2013. So, it’s a long trial.

There are no further questions, so I'll now turn the call back over to Mr. Samant.

Well, thank you very much. We look forward to seeing some of you at the upcoming investor conferences come this fall.

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