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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
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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