2007 Analyst Interview with: George Fulop MD, Vice President, Biotechnology & Life Sciences - featuring: their vaccines and immunotherapies based on its unique non-viral DNA technology for the prevention or treatment of infectious diseases, cancer, and cardiovascular diseases.

Vical Incorporated (VICL-NASDAQ) - Analyst

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Vical Incorporated’s unique DNA vaccine technology addresses many conditions ranging from HIV to influenza and the avian flu, is an alternative to traditional vaccine development and offers a shorter path to development and manufacturing timeline

Healthcare
Biotechnology & Drugs
Analyst Interview Covering:
Vical Incorporated (VICL-NASDAQ)
10390 Pacific Center Court
San Diego, CA 92121
Phone: 858-646-1100

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George Fulop MD
Vice President, Biotechnology & Life Sciences
Needham & Co.

Interview conducted by:
Walter Banks, Publisher
CEOCFOinterviews.com
Published – February 15, 2007

BIO:
Dr. George Fulop is Vice President, Equity Research at Needham and Company, a full-service investment bank in New York City, where he serves as a senior analyst in biotechnology and biopharmaceuticals. His coverage universe focuses on small-mid cap companies in the central nervous system/metabolic disorders and infectious/inflammatory diseases. Companies under coverage at this time include Acadia (ACAD), Anadys (ANDS), Anesiva (ANSV), Arena Pharmaceuticals (ARNA), Avant Immunotherapeutics (AVAN), Crucell (CRXL), Epix Pharmaceuticals (EPIX), Nastech (NSTK), Pain Therapeutics (PTIE), Panacos Pharmaceuticals (PANC), Progenics Pharmaceuticals (PGNX), Rigel Pharmaceuticals (RIGL), Vertex (VRTX), and Vical (VICL).

Dr. Fulop was a full-time faculty member and medical researcher at The Mount Sinai School of Medicine from 1987-1996, reaching the title of Associate Professor and publishing over 60 original articles. He worked at Merck-Medco Managed Care, L.L.C. as Senior Director, Medical Affairs and Business Development, from 1996-2003 until he joined Needham and Company in 2004. Dr. Fulop received an AB degree from Columbia University, an MD from the Albert Einstein College of Medicine, and an MSCM (MPH equivalent) degree from The Mount Sinai School of Medicine. He completed postdoctoral training in general preventive medicine and public health, and psychiatry/neurology at The Mount Sinai Hospital.

CEOCFO
: Dr. Fulop, will you tell us about the company?
Dr. Fulop: “I am a physician and have a background in general medicine and also neurology and psychiatry. I cover infectious disease, inflammation and CNS/Metabolic diseases for Needham & Company.”

CEOCFO: One of the companies that you have been following is Vical Incorporated traded on the NASDAQ symbol VICL, will you tell what interested you in the company and what caused you to start following them?
Dr. Fulop: “Vical has a unique technology that caught my attention; they used DNA vaccines and address many conditions ranging from HIV to influenza and even avian flu. They have a unique technology that I think is promising and an alternative to traditional vaccine development.”

CEOCFO: Are there any other companies besides Vical that is working on DNA vaccines, and if so what gives Vical the edge in bringing the product to market?
Dr. Fulop: “There are other companies. Recently Pfizer, Incorporated (NYSE: PFE) bought PowderMed Ltd. (a privately held UK company), so there is interest in the space by big pharma and work by others in getting DNA vaccines to market. What I like in particular about Vical is the management experience and that management comes out of Merck Vaccine Division (Merck & Co. Inc. – NYSE: MRK), one of the premiere vaccine developers in the country. I also like the fact that DNA vaccines offer a rapid time from the identification of the threat to the time it takes to get it into man. Secondly, it offers manufacturing efficiency; once you have identified the vaccine you want to make, it is a very rapid manufacturing process compared to the cumbersome and long time needed to do the traditional egg-based vaccine development. An example of that is the SARS (Severe Acute Respiratory Syndrome) virus; it took about 18 months to 2 years to get a DNA vaccine into the clinic and it would take a lot longer if you were doing traditional sources. They can also then quickly ramp up manufacturing to produce a SARS vaccine.”

CEOCFO: Is there any advantage as far as patient responses with DNA opposed to traditional vaccines?
Dr. Fulop: “Right now, that is an open question in some people’s minds. We are encouraged by the functional efficacy of DNA vaccine, especially in sensitive models such as the lethal challenges of bird flu in ferret models, which is a very good predictor of response in man. Therefore, immunogenicity is the key criteria of regulatory criteria and DNA vaccines in general, do not show as robust a response as do traditional vaccines. However, the concept of functional efficacy is important, in which the overall protection is quite promising. For example, 100% protection in ferrets, whether there is high immunogenicity or not, the issue is that they were fully protected.”

CEOCFO: Vical has several Phase II and III studies going on, do you want to talk a bit about those?
Dr. Fulop: “Many of Vical’s programs are partnered and one of the Phase III programs is an Allovectin-7 trial for metastatic melanoma. It is proceeding well although it previously hit some bumps in the road, and AnGes MG, one of Vical partners is taking it forward, and we look forward to hearing results for that. The company’s internal lead program is Cytomegalovirus (CMV) DNA vaccine. It is one of the problematic viruses that if it occurs during pregnancy, it can cause congenital defects. Ultimately, the CMV DNA vaccines will protect pregnant mothers and their children from congenital defects. However, they are not pursuing that right now; currently, they are using it in hematopoietic cell transplant (HCT) patients, because CMV is also a threat during transplants. The first thing they are going to prove is that a DNA vaccine is effective in preventing CMV viremia in a transplant setting and ultimately translate that knowledge into a broader population, women of child-bearing age.”

CEOCFO: Is that in Phase II or III?
Dr. Fulop: “That is a Phase II, proof of concept trial.”

CEOCFO: They also have another product in Phase III that they are doing with the company called Sanofi (Sanofi-Aventis Group – Euronext: SAN, NYSE: SNY)?
Dr. Fulop: “The other late-stage product they are working on is FGF 1 for peripheral arterial disease (PAD), where they are getting a Phase III trial going. We need to hear more on that. The partner programs are a validation of interest in DNA vaccine technology and other technologies that Vical have. It also offers potential financial royalties and revenues for the company. The fact that there are about 20 programs in total, many of them partnered, such as a Merck partnered program in HIV, and NIH (National Institute of Health) programs in Ebola, West Nile Virus, and an HIV vaccine. Therefore, there are a number of partnered programs, but the ones we focus on are the internal programs of CMV and avian flu and flu.”

CEOCFO: In closing, will you tell us what your rating is on Vical and what your expectations are?
Dr. Fulop: “We have a Buy rating on Vical. We have price target of $8.00 and today they are trading at $6.31, so it is still a decent entry point. We expect reports of various trial results and progress in enrollment in the CMV Phase II trial, along with news from partnered programs to drive company value. We also are awaiting the introduction of an avian flu or flu DNA vaccine program to the clinic this year. Those are all news items that are potential stock catalysts. The key risk is that Vical has a very promising technology, but the regulatory path and other challenges in terms of immunogenicity and approval are still to be determined.”

Please note Disclosure Codes:  B, E, G.

"A" The research analyst and/or research associate (or household member) has a financial interest in the securities of the covered company (i.e., a long position consisting of common stock).

"B" The research analyst and research associate have received compensation based upon various factors, including quality of research, investor client feedback, and the Firm's overall revenues, which includes investment banking revenues.

"C" The Firm has managed or co-managed a public offering of securities for the subject company in the past 12 months.

"D" The Firm and/or its affiliate have received compensation for investment banking services from the subject company in the past 12 months.

"E" The Firm and/or its affiliate expect to receive or intend to seek compensation for investment banking services from the subject company in the next three months.

"F" The analyst or a member of the analyst's household serves as officer, director or advisory board member of the covered company.

"G" The Firm, at the time of publication, makes a market in the subject company.

"H" The Firm, and/or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company.

"I" The analyst has received compensation from the subject company in the last 12 months.

"J" The subject company currently is or during the 12-month period preceding the date of distribution of this research report was a client of the Firm and received investment banking services.

"J1" The subject company currently is or during the 12-month period preceding the date of distribution of this research report was a client of the Firm and received non-investment banking securities related services.

"J2" The subject company currently is or during the 12-month period preceding the date of distribution of this research report was a client of the Firm and received non-securities related services.

"K" Our affiliate has received compensation for products and services other than investment banking services from the subject company in the past 12 months.

George Fulop MD, MS
Vice President, Biotechnology & Life Sciences
Equity Research
Needham & Company
445 Park Avenue
New York, NY 10022


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“Vical has a unique technology that caught my attention; they used DNA vaccines and address many conditions ranging from HIV to influenza and even avian flu. They have a unique technology that I think is promising and an alternative to traditional vaccine development.” - George Fulop MD

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