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

Lee Kalowski - Credit Suisse Eric Schmidt - Cowen & Company Howard Liang - Leerink Swann Stephen Willey - Stifel Nicolaus

Ladies and gentlemen thank you for your patience and welcome 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, Investor Relations. Please go ahead, sir.

Thank you. Sorry everyone for the technical difficulties. We had a problem getting into the call. Welcome to our third quarter 2012 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 independent and collaborative research and clinical 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 2012 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. Sorry for this technical difficulty we had this morning. Hopefully, we have some very important news I am going to share with you. In today's call, I will read the status of each of our independent development programs as well as our partnered programs, but before I do that, I’ll have Jill Broadfoot give you an update on our latest financial results. Jill?

Thank you, Vijay. Our third quarter 2012 financial results reflected continued program advancement and sustained financial strength. Revenues were $2.2 million for the third quarter of 2012 compared with $26.6 million for the third quarter of 2011. The decrease in revenues was primarily driven by the $25 million upfront payment from Astellas last year for the TransVax license partially offset by reimbursements from the Astellas for expenses this year in support of TransVax. Our net loss for the third quarter of 2012 was $7.7 million compared with the net income of $16.4 million for the third quarter of 2011. Revenues for the first nine months of 2012 were $15.2 million compared with $28.1 million for the first nine months of 2011. This decline in revenues again primarily reflected the impact of the upfront payment under the TransVax license agreement last year and was partially offset by a $10 million milestone payment received in 2012 and the ongoing reimbursements for expenses this year under the license agreement. Net loss for the first nine months of 2012 was $15.4 million compared with the net loss of $700,000 for the first nine months of 2011. At September 30, 2012, we had cash and equivalents of $92 million. We narrowed our full year 2012 net cash burn forecast trends this morning to $18 million to $20 million excluding cash from equity sales and believe we have sufficient capital for our planned activities for at least the end of 2013. I will now turn the call back to Vijay.

Thank you Jill. I am sure you all saw announcement earlier this morning changing our timeline guidance for the release of Allovectin data. We had been predicting that we would reach the targeted number of death events in late 2012, we are not projecting that we will reach the targeted number a few months later. I want to spend sometime this morning reviewing the details, the rationale behind this change. In September, we conducted, in September of this year, we conducted a comprehensive sweep of clinical sites to obtain patient death information. The purpose of this sweep is to eliminate any time lag between actual death and reported death, which can be several months and caused an understatement of death events. The sweep of our clinical sites was completed by September end and we now have a more accurate account of death events. That count has confirmed that we have still not reached our target number of death events. Having said that, there has been a steady progress towards the goal and based on the moving average of monthly events, we are now expecting to reach the goal in by middle of 2013. It appears from these circumstances that either one or both arms of the study maybe laying longer than our original median survival assumptions. As a reminder, we designed our Phase 3 study based on lessons learned from our Phase 2 study such as enrolling only chemo-naïve patients and modifying the resist criteria to keep the patients on the study longer. These factors could potentially increase both response rate and survival. In addition, improving standards of care for melanoma patients including recent approvals of new therapies could increase survival. In preparation for the final safety analysis by independent safety monitoring board, we reviewed the final patient demographics data and identified some very useful information that I would like to share with you this morning. As a reminder, in our Phase 2 trial, 48% of the patients had stage 4 melanoma and the median age of patients in that study was 60. We now know that our Phase 3 trial had 63% of patients with stage 4 melanoma and the median age of patients is 64. Therefore, a reminder that our Phase 3 patient should not be assumed to be healthier than our Phase II patients. Given the recent approvals of two new drugs based on survival benefits it is important for our Phase 3 trial of Allovectin to provide a clear assessment of effects and survival; waiting to achieve the target number of death events will provide improved statistical power for evaluation of the survival endpoint. However, the big advantage in waiting is that immunotherapy, the deepen impact maker much later than with chemotherapy, this could result in a Kaplan-Meier mark that will with a tail effect and a greater separation between the two survival codes at later time points. We saw this in fact illustrated quite well in last year’s New England Journal of Medicine Articles and the results of that were post line trial. If Allovectin has a similar effect waiting to reach the target number may allow us to capture the separation of course more effectively. Independent adjudication of the primary endpoint is in progress, but not yet complete. This additional time that we now have to collect the remaining survival data will allow the committee members to complete this process as thoroughly as possible. Just as a reminder, the adjudicators remain blinded throughout this process as stated previously our goal is to align both the response rate and survival databases and to announce the results simultaneously. On a final note on Allovectin, the safety monitoring board conclusion from the final safety review of Phase 3 was that the treatment with Allovectin, I am going to quote them “has no basis for any concern that there is undue risk.” It’s noteworthy that Allovectin has demonstrated an excellent safety profile in earlier studies. We are pleased with the trial’s progress to-date and eager to reach the completion. We are also encouraged with the continued progress in the field of melanoma immunotherapy over the past year and half, beginning with the approval of (inaudible) and more recently with the positive data of PD-1 and PD-L1 antibodies we believe Allovectin is well positioned to potentially extend this progress further and validate this approach. I just want to remind our listeners, in October this year, we expanded our Board of Directors with the addition of George Morrow, who retired last year as Executive Vice President of Global Commercial Operations in Amgen. His commercial experience before Amgen including two decades split between Glaxo Wellcome and Merck. We believe George will be a tremendous asset as we advance with our preparations for the potential commercialization of Allovectin. I will finish with a quick review of our other key programs. We have been working closely with our TransVax licensing and our development partner Astellas to finalize the design of the two trials. We are very pleased with our partner and the progress we have made, a multi-national pivotal Phase 3 trial in recipients in hematopoietic stem cell transplants and a Phase 2 trial for TransVax in recipient of solid organ transplants, our partner Allovectin is projecting initiation of both trials in 2013. We expect to provide details on the trials including the design and timelines as soon as the trial begins. HSV-2, we have continued progressed in our herpes simplex 2 vaccine development program and preparations for IND filing and we plan to initiate a Phase 1/2 trial in 2013. In September, we entered into a worldwide non-exclusive license with Bristol-Myers Squibb to use our DNA immunization technology and our adjuvant Vaxfectin in the production of antibodies. As the first license for this important application for technology, we hope this can service a template for additional agreement with others. The BMS agreement is also the first for our Vaxfectin Adjuvant which have be working on a variety of fronts. On the personnel front since last week, we have announced the appointment of Dr. Anza Mammen as VP of Clinical Vaccines. He will be primarily focusing on infectious disease vaccine program. Anza recently retired from a 20 plus year career with the US Army and has a broad range of highly relevant experience in Vical’s vaccine development programs. We look forward to substantial contributions to our future success. We continue to focus our efforts on our key development programs. Our top priority remains the completion of our Phase 3 trial of Allovectin. Based on the results of our recent sweep, we expect that our results to occur in mid 2013. We expect our partner Astellas to initiate a Phase 3 trial of TransVax in stem cell transplant recipients and a Phase 2 trial of TransVax in solid organ transplant recipients in 2013. We are advancing towards initiation of Phase 1/2 trial for vaccines, a therapeutic vaccine for herpes simplex 2 in 2013. As Jill mentioned earlier, we have sufficient financial resources to support our planned development at least till 2013 or more. This concludes my prepared comments. Operator, we are now ready to open the call to questions from our invited participants. Thank you.

Thank you Mr. Samant. The question-and-answer session will begin at this time. (Operator Instructions) And we will hear first from Lee Kalowski with Credit Suisse. Lee Kalowski - Credit Suisse: Great, thank you for taking my question. So on Allovectin, pushing it out, the timeline out about six months; I guess is there anything you can say about following the sweep, how many deaths, how many you need or anything else you might be able to say about what you've seen so far that makes you think that the data will be available in 2013, middle 2013.

I think just to remind you first of all you know before if people are overreacting to the DNA, I mean the trial started in January of ’07, by end of this year the trial is six months, waiting for few additional months to get the data out is not that crazy okay. Take a look at the YERVOY study, they unblended the data three years after enrolment of the last patient, okay. We enrolled our last patient in February of 2010, so we are not that far off for what other companies have done, and you need to remember that you know we are doing a single study in Allovectin 7, the landscape has changed, trying to do another study with [Vical] is going to be primarily impossible and we need to make sure that we put points in the book and you know we have set up some targets of what the event rates are and I know people are unhappy of the change but this is the reality of clinical trials, we need to meet our goals and targets. All I can tell you as I've said this sweep was a good sweep, we are making progress, its not like we are static at one point and haven't moved. But I can’t tell you what the specific of the event raised are at this stage. But I will tell you we would be getting closer. Lee Kalowski - Credit Suisse: So I guess what was it that you saw that you are able to come up with in the middle of 2013 as soon as then, is there…

Well, the way you do a moving average of the past four months of what the patient tests had been and then you subtract what your target number is versus where you are and you divide by the moving average in a monthly basis and put a factor in that, it may further slow down and come with an estimated time line. Now obviously the moving average earlier in the study was a little larger that's why we talked we are going to do, but we did what we should have realized that that moving average is going to drop, but now we're getting towards the end of the study. So we don’t expect the moving average to be substantially different from where we are today. Lee Kalowski - Credit Suisse: You say you are going to release that ORR at the same time. If there are further delays here, I mean, obviously the adjudication is ongoing. Is there a chance, if there is further delay that you would release ORR first?

We said we're going to, I think you are speculating now when you say there are going to be further delay. I mean, you don’t seem to be convinced after what I told you that what the Bristol-Myers experience was. I think we have a pretty good prediction but we're going to keep you guys informed as we go through. So I wouldn't speculate at this time what occurs. Right now our timeline is the middle of the year and our goal is to announce both the end points simultaneously.

We’ll take our next question from Eric Schmidt with Cowen & Company. Eric Schmidt - Cowen & Company: Just a question here on TransVax. I think the timeline there also got pushed back a little bit, I thought we were expecting your partners to start study in late 2012. Can you speak to that?

No, I think, I wouldn’t read too much in to it. First of all let me tell you that our friends in Astellas have done a pretty comprehensive job in getting all the European experts and US experts lined up. Most of the experts were also working with Vical. They also got some very good statisticians lined up. The trial side, all I can tell you is larger than what we originally contemplating. The end point design I think has been battered both on the European side and the US side. So there is a conformance on that. So this has taken a little time. They also remember switch from the Roche assay to the Abbott assay, so that’s a little change because they wanted Abbott because they are more comfortable with that assay. We are working the Roche (inaudible) assay. So when you start - you make some changes those have to be all incorporated into the trial design. The agency is to be informed, the site has to be informed. It just take a little longer working, with bigger larger companies also takes a longer because they have procedure systems that have been followed. So I would not reach, but I think - also you need to understand once they get going their horsepower is much bigger than ours. They are going to recruit faster they are going to open more centers faster than we could ever done. So yeah sure there is a little bit of delay they will catch up they are a smart company. Eric Schmidt - Cowen & Company: Should we look forward to that study starting in the first half versus the second half the (inaudible).

Absolutely, first half. I just said 2013 because then you guys say Vijay you told me Jan and its March and you told me its delayed it’s like a few months delay and everybody is all panicking and frankly speaking that’s a positive development today.

(Operator Instructions). We will now go to Howard Liang with Leerink Swann. Howard Liang - Leerink Swann: So just going back to the Allovectin Phase III trial; what is the rate of loss to follow up as it compares to your assumptions?

I think we are right below our assumptions is all I can tell you, nothing unusual there. Howard Liang - Leerink Swann: Okay.

People have looked at it in a blinded fashion. I think you know it’s remarkable given the fact that it’s not blinded to the patients. It’s an important point Howard it’s an important point because there are lot of phases, you will the loss to power, you should also have the question of drop out rates, because when patients know what they are getting, they have the ability to walk away from the study, okay, and both are last two follow up and our dropout rates within what we expect, okay so nothing unusual there. Howard Liang - Leerink Swann: Okay, so the push- out is purely due to a slower event rates but not due to any operational issues?

Up to our knowledge. Howard Liang - Leerink Swann: Okay, and then what was the point of the independent monitoring review in the third quarter on safety even I think all of the patient have been off treatment that there is nothing they could have done anyway?

True. Remember the last patient was a student in Feb 2010, the last treatment occurred in Feb 2012, the follow on visit occurred in the end of March. By the time we go all the paper work that was done, the data base was locked May or early June and maybe with the question of scheduling because these are all important oncologist so that's the reason it took as two, three months after the data base is lost. And remember this is final review and we wanted to make sure everything is sacrosanct and that's where the information came out, and I don't know what your reaction to that information is, but I just wanted to make sure that information was clearly understood by people. Within our Phase 2 study we had stage 4 melanoma patients with 48% leading in to 60 and this study has been completed the number is about 63% stage four and a median at 65, so much older patients then we had in the prior study. Howard Liang - Leerink Swann: Got it, and then I think (inaudible) no internal lower count, efficacy, does the case that independent board….?

For your safety, no efficacy reviews, we are finding towards the data inside the third party, and the adjudication is also blinded to the adjudicator, so now we don't have independent, I am not sitting on any piece of information that you don't know. Howard Liang - Leerink Swann: But does the DSMB have any access to efficacy data to survive at all etc.

No, only on safety. No survival, there's no survival. We don't have access to the survival and survival data base is in the third party.

Thank you. And we will continue on to [Lyn Benjamin with Borough and Company].

Can you talk a little bit about when do you think the adjudications for the primary end point might be completed.

You know I don't want to give a timeline, all I can tell you is first of all it’s a good question that you are asking, the adjudication process is also taking a little longer than we originally thought because we didn't realize how complex it is, this is not a standard adjudication of radiological scans, there are two components to it. First is the radiological adjudication of every patient and once the radiological adjudication is done then the oncologists have to meet with the central radiologist and they go by patient by patient, cycle by cycle and at the every end of each cycle every radiologist, the three oncologists and radiologists are to sign off on the computer screen. So it’s a pretty long process and they have been meeting weekends and it takes a long time, the thoroughness is very important. So it has taken them a little longer. As we have gone through it, the time is - could we have speeded up if we had the data in December, yes, putting a lot of pressure but you know what this gives us the time to do it right because these guys come on Friday night, work Saturday-Sunday and go back to work on Monday, okay. That's a lot of work. And they come from four different parts of the country so its not easy.

And as part of the process Vijay if there's a disagreement, is there a third party that's getting involved that makes the final call and based on how its gone so far, have you seen much disagreement at all or has it been pretty straightforward.

Let me explain to you first of all; the two radiologists actually adjudicate independently, remotely, they are not sitting together when they read the scan. The third radiologist then looks at the scan reads independently without those two guys being in the presence and picks either one or the other; cycle by cycle, cycle by cycle, okay for entire patient. Then those two radiologists who were involved in the radiological adjudication (inaudible), the third radiologists will be adjudicated, this is done with the three oncologists. There's one oncologist who takes the lead depending on the session and they go through and they reach a consensus between three of them they have the ability that's why the radiologist, the oncologists have to vote, there's a disagreement but you know they are all savvy, smart people, okay, well educated tiding patients, we are not involved in it so we don't know what's happening in the room. We have not done anything, they are still working together. They are fighting with each other and we wouldn't have come to the next session. So they are all working together is all I can tell you.

Right and just regarding the sweep, can you provide us with just a little bit more color of what's involved in the sweep. You said it was all encompassing and it definitely eliminates the time lag, is it just looking at documentation, do you then have to go ahead and double check that documentation and how…

Excellent question first of all. Randy, what occurs normally is the patients don't like to be called once they progress in the trial and go away, they probably go to another treatment and patients don't like to be called every two minutes. So if you can think are you alive, are you alive, are you alive. So there is a fixed time based on which they call based on their time of recruitment, a couple of months to speak, I don't know what the exact time is three or six months. So everybody is not called in the month of November for example. So if I call somebody in November, the next time I may not call him in February or March. What we did in September is we went to all the sites and the site coordinators in the month of September actually contacted the patients or physically saw the patients. So that way we know that the bodies were there, patients are alive. So this is not a paper exercise. This is actual calling up and saying, are you there? You call up, you answer the phone. Right, okay, Ren is around. Alright, thank you Ren, how are you doing, I am feeling good. Good bye. Talk to you next week or next month or three months down the road. So we catch up between the lag that’s there. Sometimes what occurs is by calling the patient in the month of March and I am not calling him till August, he may died after my call the very next day and I don’t find out till the month of August. Do you follow me?

Yes.

So, this is like, this is the rock solid number when you get this number at the end of September. There are no other deaths [found] okay?

Got it. Just looking at how, I am sure that with these new numbers, you guys are running whole new statistical analysis internally to try to figure out how things could be working. Do you have any sense or any thoughts of how a prolong trial like this, typically you think this is just much better for patients than the treatment on but statistically, do you have any sort of idea how the prolonged nature of this trial might affect the hazard ratio, your powering assumptions, does it get better, does it get worse? How should we be looking at that?

You know, we generally try to avoid doing all kinds of statistical analysis because what in the end, the results what is going to be the results, but a lot of independent people who are doing analysis and floating them out, okay. The problem is modeling. This is not easy because most of the modeling is done using [constant] hazard ratios. That’s the most conservative assumptions of course the hazard ratio assumption is an extremely conservative assumption. I think to back that without doing a lot of analysis the fact that the trial will be almost 80 months old by the time we release the data is a testament that whatever assumptions you would do in the back of envelop tell you that there is something going on here.

Okay. And just I know that you mentioned in the press release and in the talk here that it was a final data phase you are monitoring, reviewing that it was comprehensive, is there going to be another one in the middle of the first quarter next year?

This is it, this is it, this is the final (inaudible) is down now where the patients are off treatment now. And the other point before I made about waiting, take a look at the New England Journal of Medicine and take a look at the hazard ratio and take a look at the median survival number, it’s the integration of across the (inaudible) that gave them that p value point of 0.00 something if you just took the median survival 9.1 that stopped trial just after reaching the immediate events it would have been statistically significant, okay.

And then just switching gears very quickly to vaccine and the partnership there, can we be expecting with the number of vaccines under trial and several big pharmas are all making huge pushes into more and more vaccines, the adjuvant space seems to be coming to life quite nicely, should we be expecting more partnerships with other potential players going forward or is this something that’s just kind of on the backburner for you guys and if someone comes in [express] interest grade otherwise it’s not really moving forward in your own arms?

All right, you got me a little bit agitated here, there are a lot of people who are claiming that they working on adjuvants okay but really there are no adjuvants and I would just urge you to go around and look at companies which are pending adjuvant and you are not heard a lot of what the adjuvant are doing, that expected and (inaudible) into two human studies, two influence of studies in human, okay. But it has had a very good profile board from a safety perspective. Obviously, we need to the lot more one safety but also an efficacy okay. This is by the way not even an adjuvant is used in adjuvant [setting] this is a core technology to generate antibodies tells you the versatility of this particular tech that we have, which can be used for both in an antibody study for generating antibodies using our core technology, it can be used in cancer vaccine and also an infection of this vaccines. We are working with a lot of people and you know our work with (inaudible) by the way was going on for quite number of years and most people take the time to evaluate this particular adjuvant in their own [mouse trap], what’s in their own mouse trap then they all get excited, no matter how good our mouse trap is they don't want to buy our data. And so the answer is we had a lot of (inaudible) in the fire and so the answer is this is not a one of event, we hope this should be leveraged over the long period of time some other opportunities okay, in the coming months.

Okay, and final question from [vectin] or anything happening there?

We continue to have discussions with people both in the big pharma place but we are still waiting for that guidance from the agency, we choose based on the Jan work shop that we had and that guidance is going to be critical in terms of partners understanding what the full scope of the clinical trail is. So it’s taking a little longer for the agency to come out but hopefully when that comes out there will be some traction.

:

Are you guys changing your survival prediction for the comparator arm now that you are having a slightly shifted percentage of stage 4 patients, the 63% and a slightly higher mean age or you are sticking with the 11 months to 13 months previous prediction?

I think the way we virtually view is whatever your original assumptions are, you don't change them. Those are the assumptions. This is just additional fact. You don't, once the trial starts whatever your statistical plan was set in the beginning is what the plan was and you stick with that plan, okay. So I don't think we are changing any assumptions which is giving you qualitative information in terms of what the facts are so that as you judge the time that has taken to reach the event rate you put that in context. No, we are not changing anything at this stage. That doesn't mean anything is changing, anything with the studies occurring, it’s already [powered], so it’s nothing that we can change and being conservative and sticking what we have makes the most sense.

Thank you. (Operator Instructions) We will here from Stephen Willey with Stifel Nicolaus. Stephen Willey - Stifel Nicolaus: Can you just remind us if you guys stratify on the basis of disease stage?

The answer is yes. Stephen Willey - Stifel Nicolaus: Okay. That's all I have. Thanks guys.

Thanks Steve, your water situation is good right. No water in the basement? Stephen Willey - Stifel Nicolaus: No water in the basement, thanks Vijay.

Thank you. And we will take our next question from [Catherine Zu] with William Blair.

I am just wondering do you have any information on the subsequent therapies that the patients took?

No, we don't, you know I mean, the study is randomized and you know when the study started none of these subsequent therapies were approved. So there is no specification to follow these patients what they got, so the answer is no. And the study is two to one randomized, the only thing I tell you is that when the trial was conducted none of the (inaudible) drugs were approved so the probability of our patients getting those two drugs during the conduct of our trial was low and the first time that occurred was in the month of May or April when the (inaudible) put in the US and subsequently in September. But we don't have what people are getting for long. And there's no crossover in the study either, okay. So, none of the people are getting Allovectin from the controller.

Right. So it looks like a very plausible hypothesis for this kind of observation is of course people living longer like you said in either or both arms and but just besides this any other operationally clinical conduct wise the trial conduct wise, design wise, anything that you think that are in balance or could potentially affect the outcome.

Not to our knowledge, I mean, those trial distribution of patients in Europe and United States is about 45-45, EMEA up by 2% and 10% in Israel and Brazil and Canada. You know it’s not one single site recruiting a (inaudible) patients or anything like that. They are fairly reasonably well distributed, though Israel has been a good recruiting center for us, I said that publicly before. Nothing that I can think of, okay, in any particular way, okay. So not that I know of.

Thank you. (Operator Instructions) We will take a follow-up from Stephen Willey. Stephen Willey - Stifel Nicolaus: Just one additional question. Were there other stratification factors that were used in randomizing patients through either ARM and do you know at this point whether or not there is any kind of imbalance in terms of baseline characteristics?

No, not. The normal LDH is something that we do. There is no stratification really that we do centrally at Mayo. Alan?

There were three stratification criteria, it was the stage, whether its stage 3 or 4, what’s there (inaudible) score, whether was 0 or 1 and there was a number of injectible lesions that they have one or more.

And we have no additional questions in the queue. At this time, I will turn things back over to our speakers for any additional or closing remarks.

Well, thank you for your time. I hope all my callers this year from New York City have got their power back and are dry because I just heard in the news that there is another Frankenstorm is coming that way. So, stay safe. Talk to you soon.

Thank you. And again ladies and gentlemen, that does conclude today’s conference. Thank you all for your participation.