Tony Ramos - Chief Accounting Officer Vijay Samant - President and CEO

Jonathan Eckard - Citi

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 Tony Ramos, Chief Accounting Officer. Please go ahead.

Hello, everyone. Welcome to our third quarter 2013 financial results conference call. Joining me on the call today is Vical's President and Chief Executive Officer, Mr. Vijay Samant. 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 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 2013 financial results. These forward-looking statements represent the company's judgment and expectations as of today. The company disclaims 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, Tony, and good morning to all our participants for joining the call. Today we will discuss the status and expectations for our key development programs, including a detail look at the recently started Phase 3 trial of ASP0113, formally known as TransVax. We will begin the call today with a review of financial results by Chief Accounting Officer, Tony. Tony, you are on.

Thank you, Vijay. We reported financial results this morning for the third quarter and first nine months of 2013. Revenues were $4.6 million for the first nine months of 2013, compared with $15.2 million for the first nine months of 2012. The decrease in revenues was primarily a result of the $10 million milestone payment we received from Astellas last year for progress in ASP0113 vaccine program. Research and development expenses were $12.1 million for the first nine months of 2013, compared with $13.9 million for the first nine months of 2012. The decrease in R&D spending primarily reflects the sub-license payment we made in the first nine months of 2012 related to the Astellas milestone payment. Manufacturing and production expenses were $11.5 million in the first nine months of 2013, compared with $9.3 million in the first nine months of 2012. The increase in manufacturing and production expenses was driven by increased activity related to our Allovectin program and the Astellas agreements combined with our August 2013 restructuring charges. General and administrative expenses were $11.5 million in the first nine months of 2013, compared with $9.3 million in the first nine months of 2012. The increase in G&A spending primarily reflects costs associated with our August 2013 restructuring combined with an increase in legal and accounting fees. The net loss was $29 million for the first nine months of 2013, compared with $15.4 million for the first nine months of 2012, with the Astellas milestone payment last year and the $2.2 million personnel-related restructuring charge this year accounting for most of that difference. Our Q3 2013 net use of cash was approximately $8.5 million, which is in line with our second half forecasted range of $13 million to $15 million. We ended the quarter with cash and investments of $61 million. With that, I will now turn the call back to Vijay.

Thank you, Tony. I'll begin today with a brief update on our recently terminated Allovectin program. In August, we announced the top line results from our Phase 3 trial of Allovectin in patients with metastatic melanoma. The trial failed to demonstrate the statistically significant improvement compared to the first-line chemotherapy for either the primary or secondary end points. Recently we completed the clinical trial report and shared it with our partner, AnGes that triggered a milestone payment in early October of $0.5 million. I am pleased to announce today that the detailed trial results have been accepted for presentation at the scientific conference in November. The full set of slides will be posted to our website after the public presentation. Despite the setback from Allovectin program, we’re excited about our pipeline overall and the broad application of our technology. For example, our therapeutic vaccine for herpes simplex virus type 2 is designed to help control outbreaks and shutting in people already infected with the virus. More than 500 million people worldwide, about 100 districts in 15 to 49 age group are living with chronic HSV-2 infections, so this represents the significant unmet medical need and a large commercial opportunity. Most of these subjects either do not have access to or do not effectively use antiviral drugs, which are the only treatment option at this point. We are on schedule to initiate a Phase 1/2 trial by the end of 2013. We have completed [CJV] production of our HSV-2 vaccine candidate and I'm pleased to report that we received IND allowance from the FDA yesterday. We are working towards initiating clinical sites and anticipate dosing for the first group of volunteers by the year end 2013. Let me take a few minutes to elaborate on the design of our Phase 1/2 trial. This trial will be a randomized, double-blind, placebo controlled study at seven sites in the U.S. This trial will enroll approximately 150 subjects to our HSV-2 positive and we experience 2 to 9 recurrence per year of genital herpes lesions who are otherwise normal and healthy. Because this is the first time these vaccines have been tested in humans, we plan a dose escalation for the first two cohorts and assuming favorable safety a full dose of vaccines for the third cohort. Our primary end points in the trial are safety for all subjects and efficacy for the third cohort. We expect these symptomatic subjects with a history of recurrent genital herpes lesions to shed HSV-2 from mucosal tissue an average 20% of the time based upon historical data. Shedding means that herpes viral DNA can be detected by a sensitive PCR assay from individual subjects. This shedding rate study was published in 2011 by investigators of the University of Washington. The general shedding rate of HSV was analyzed using a large number of symptomatic subjects who self connected genital swab daily for 60 days. The shedding rates was determined by using the number of days the subject had PCR positive swab samples divided by the total number of days swabs were collected. Our clinical trial, we intend to measure a viral shedding rate across 60 days before the first vaccination and then again 60 days after the last vaccination. We've followed the study to detect that piece of 30% decrease in viral shedding after vaccination compared to before vaccination. This before and after shedding date I expect to let each subject serve as their own control, because this is a randomized controlled trial give an opportunity to demonstrate proof-of-concept but efficacy against an important biologic endpoint that is an appropriate surrogate of the clinical endpoint mainly genital herpes lesions. Again, we expect to begin dosing this trial before year-end. Next I'll discuss CMV vaccine ASP0113, formally known as TransVax. In collaboration with the partner Astellas, we announced in June the initiation of a pivotal Phase 3 trial in hematopoietic cell transplant recipients to support registration of ASP0113. This trial is actively enrolling subjects to the United States and will soon be enrolling subjects in other countries, but the Phase 3 trial Astellas is only enrolling subjects who are CMV positive as they’re at high risk for CMV reactivation during the post transplant recovery period before the new immune systems become fully functional. CMV can lead to a variety of serious complications including pneumonia, organ failure and death. In short, these are very sick patients and CMV seriously threatens the chance of successful transplant procedure. Our vaccine is intended to control CMV during this period of vulnerability typically in the first 100 days after the transplant procedure and thereby reduce or eliminate the need for toxic and expensive antiviral drug therapies that are currently used. By one year post transplant, our planned follow-up period to the Phase 3 trial, the new immune system typically is able to control CMV on its own. As I described in our last earnings call, the Phase 3 trial incorporates an adaptive design that includes overall mortality as a standalone primary efficacy end point or as a part of the composite end point revoked with Astellas to design this Phase 3 trial with primary end point that has a potential to support full approval in all key markets with no post approval study requirements. Full approval requires a clinically meaningful end point. Because of this logic we have designed the Phase 3 with the primary endpoint of overall mortality at one year after transplant. Astellas expects to complete this trial by the end of 2016. Separately a planned Phase 2 trial of ASP0113 in solid organ transplant recipients is expected to begin later this year in 2013. This trial will enroll approximately 150 CMV-seronegative donors who receive a kidney from CMV-seropositive donor. So these are what we call the donor positive recipient negative patient pairs who are at high risk for CMV infection after transplantation. So we believe vaccination with the ASP0113 may provide protection against CMV in this group. The primary endpoint of this Phase 2 trial will be the incidence of CMV viremia after transplantation will be monitoring several secondary endpoints including CMV disease, CMV specific antiviral therapy, CMV viral load grafts survival and overall mortality and of course safety. We’ll continue to provide updates when this trial begins enrolling, which is expected to begin enrolling by the end of this year. In summary, we are extremely pleased to be working with Astellas, who have proven to be an excellent partner for a CMV vaccine program. We are excited to have a Phase 3 trial underway and we’re looking forward to completing the process as efficiently as possible. In our news release this morning we confirmed the guidance for the remainder of the year. We expect to present data from our Phase 3 trial of Allovectin at a scientific conference in November. We plan to initiate a Phase 1/2 trial of our vaccine for HSV-2 by the end of 2013. Astellas expects to initiate a Phase 2 trial ASP0113 in SOT patients by the end of the year. This concludes our prepared comments for today. Operator, we’re now ready to open the call for questions from invited participants.

(Operator Instructions). We will take our first question from Jonathan Eckard of Citi. Jonathan Eckard - Citi: So Vijay, I just was going to ask, you guys have several assets in the pipeline, which I believe that have potential to be monetized and not only would help boost the balance sheet, but also could increase the focus to some of the remaining programs, on partner programs. I was just wondering, has this been a focus of the company to monetize more in some of these assets, and if it is, how high the priority is it to you at this time?

Probably the business development is always an ongoing priority for any company of our size, which is particularly looking at developing resources and the two particular elements, which are obviously monetizeable across broad platform that we have. The first that comes to my mind is Vaxfectin, where we are as we've said previously working with variety of companies in use of Vaxfectin as an adjuvant in two or three different settings, which includes cancer, therapeutic vaccines and infectious disease vaccines. Now obviously most of these evaluations for new adjuvant take time because most of these companies like to evaluate an adjuvant in their own mousetrap to make sure it performance better than their own mousetrap. And so those programs have been going on for some time. You saw we recently published data from maybe six months ago, where we tested our adjuvant Vaxfectin with Baxter’s vaccine and pretty exhausted the animal model study which lasted almost 18 months, 24 months, to make sure that the vaccine adjuvant was very effective almost improving and you just see that factor of 10. So that’s an important asset which we already have new partnerships and that could lead to additional partnerships. The asset that we have which we always talk about is CyMVectin. We are not being fortunate yet in terms of creating a partnership with that, but that certainly is an asset where we have an IND approved. As I have said repeatedly it’s a large big vaccine target after Gardasil for females of child bearing. So those are two examples, but they are on our radar all the time. Jonathan Eckard - Citi: And I guess the last thing is, if you could remind us, I believe they are disclosed, what are the pre-commercial milestones that were named for transacts in both the stem cell transplant and cell tumor program?

We haven’t disclosed. I think if am not mistaken and you can correct me that the total milestones that we plan to receive of the program over the course of the success of that program would be over $130 million or $140 million or maybe outside $10 million of which we have received about $35 million so far. Jonathan Eckard - Citi: Okay. Thank you very much.

At this time, there are no further questions. I'll turn the call back over to Mr. Samant.

If there are no further questions, thank you for joining us for this call and we look forward to speaking with you at one of the upcoming conferences. Thank you again.

That concludes today's conference call. We appreciate your participation.