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Human Infectious Diseases Remain Focus of Vical’s Vaccine Research

In the public’s eye, human vaccine developer Vical Inc. might seem to be undergoing an identity crisis. The company was first submersed in the avian flu frenzy last year and is now being bombarded with phone calls about drugs to prevent dog cancer.

But, make no mistake, Chief Executive Officer Vijay Samant said Vical is focused on battling human infectious diseases.

The company, which employs 150 locally, received phone calls from pet owners recently asking for a dog vaccine that Merial Ltd. had developed using Vical’s technology.

The problem, Samant said, is that Merial, not Vical, will market the vaccine.

Federal regulators approved the vaccine last week, and a news release that said Vical would receive a $200,000 milestone payment resulted in a flurry of inquiries.

National publications such as Business Week planned to interview Vical about the treatment, Samant said.

Vical has a plentiful pipeline, including two vaccines in late phase trials, one to treat skin cancer and one medicine for artery blockages.

But, ironically, the vaccines for which Vical has received the most attention are the canine vaccine, which it did not develop, and its avian flu vaccine, Vaxfectin, only now entering human clinical trials.

Amid fears that the dreaded H5N1 bird flu would infect humans, the U.S. National Institutes of Health last year awarded Vical, along with a handful of other companies, millions of dollars in grants to battle the virus.

Vaccines Are Sexy

“All of a sudden, vaccines are sexy,” Samant said. “People are starting to realize how important vaccines are as new (threats) arise.”

The same technology is behind Vical’s 15 compounds in development.

In addition to Merial, organizations that have licensed Vical’s vaccine development technology for use in their own research and development include Merck & Co., MIT, Novartis, Sanofi-Aventis, as well as Harvard and Stanford universities.

The key is in the way the vaccine is delivered in the body, Samant said. Vical’s approach trains the immune system to recognize cell abnormalities it normally wouldn’t see, he said.

Vaccines that employ Vical’s technology are made with plasmid DNA, which occurs naturally in bacteria.

Plasmid DNA vaccines could be less costly to make, because, unlike traditional protein vaccines, they don’t require sizable factories with large fermentors.

The plasmid DNA vaccines cause the body to produce encoded proteins.

For Vical, the recent announcement about Merial’s dog vaccine approval was less about revenue and more about validating Vical’s research efforts, said Brian McCarthy, senior biotechnology analyst at Merriman Curhan Ford & Co. in New York City.

“Vical is moving forward in a very positive way,” McCarthy said.

Vical’s stock , VICL on the Nasdaq , has been trading in the $5 range.

Another analyst doesn’t give the recent announcement as much importance, since getting a medicine approved for animals doesn’t involve nearly as many hurdles as approvals for humans.

“That this type of cancer vaccine is safe is not new news,” said John McCamant, a biotech analyst and publisher of the Berkeley-based Medical Technology Stock Letter.

Vical said the technology holds potential to treat heart problems and cancer in humans.

Phase Three Trials

Products that have undergone the most testing include an angiogenic growth factor that could alleviate blockages in the legs by promoting the growth of blood vessels.

That product is in phase three trials with AnGes, one of Japan’s largest pharmaceutical firms.

“That would be the first approved use of the technology in humans,” Merriman’s McCarthy said.

AnGes, which holds rights in Japan, would pay Vical royalties, and McCarthy said the market in Japan is sizable for peripheral artery disease.

Another product, Allovectin-7, could be used to treat metastatic melanoma, a type of skin cancer. It is also in phase three trials, the last step before seeking marketing approval from the federal Food and Drug Administration.

Considering the progress Vical is making with its more advanced products, why all the hype about birds and dogs?

Samant said the pet medicine market is profitable.

Lucrative Market

In 2005, Americans spent $9 billion on veterinary care, and $9 billion on over-the-counter pet medicines, according to the American Pet Products Manufacturers Association. The group expects those numbers to increase by 7 percent in 2007.

“Getting approval for animal drugs is much faster than for human medications,” Samant said. “The hurdles for efficacy and safety are lower.”

And customers, he said, won’t think twice about spending enormous amounts of money when a family pet is ill.

“It’s like a family member,” Samant said. “Think about the kids , they would go crazy in the house if they could not save their pet.”

Despite the quicker approval of pet products and faster payoff, Vical continues to focus research on vaccines for humans.

“The value chain on the human health side is much higher,” he said. “We are not an animal health company It’s a conscious decision we made a long time ago.”

McCamant said he doubted Vical’s ability to get a vaccine approved quickly, if at all, for skin cancer.

He pointed to the former CancerVax, which had been developing a vaccine for melanoma until a failed trial caused the company to crash. German firm Micromet acquired what was left of Carlsbad’s CancerVax last year.

“Most companies have blown up (that focus on melanoma),” McCamant said.

But he pointed to Vical’s knack for licensing its technology to promising partners.

“Maybe you don’t develop everything yourself, but it’s a good business model,” McCamant said.


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