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Vical
Incorporated is focused on developing vaccines for infectious disease and cancer using
their patented DNA technology
Biotechnology & Drugs
Healthcare
(VICL - NASD)
Vical Incorporated
10390 Pacific Center Court
San Diego, CA 92121-4340
Phone: 858-646-1100
Vijay B. Samant
President and
Chief Executive Officer
Interview Conducted By:
Diane Reynolds
Associate Publisher
CEOCFOinterviews.com
August 2004
BIO:
Vijay B. Samant, President and CEO
Vijay B. Samant joined Vical in November 2000. Mr. Samant has 23 years of diverse
U.S. and international sales, marketing, operations, and business development experience
with Merck. From 1998 to mid-2000, he was Chief Operating Officer of the Merck
Vaccine Division. From 1990-1998, he served in the Merck Manufacturing Division as
Vice President of Vaccine Operations, Vice President of Business Affairs and Executive
Director of Materials Management. Mr. Samant earned his MBA from the Sloan School of
Management at the Massachusetts Institute of Technology in 1983. He received a
master’s degree in chemical engineering from Columbia University in 1977 and a
bachelor’s degree in chemical engineering from the University of Bombay, University
Department of Chemical Technology, in 1975.
Company Profile:
Vical Incorporated (NASD: VICL) researches and develops biopharmaceutical products based
on its patented DNA delivery technologies for the prevention and treatment of serious or
life-threatening diseases. In addition, the company has gained access to enhancing
technologies through licensing and collaborative agreements.
Product development efforts include:
Vaccines for use in high-risk populations for infectious disease targets for which there
are significant U.S. needs, Vaccines for general pediatric or adult populations for
infectious disease applications for which a challenge model or accepted surrogate marker
are available, and cancer vaccines or immunotherapies that complement the company’s
existing programs and core expertise.
For opportunities outside these areas, Vical plans to
continue leveraging its patented technology through licensing and collaborations. In
addition, the company plans to use its expertise, infrastructure, and financial strength
to explore in-licensing or acquisition opportunities.
CEOCFOinterviews: Mr.
Samant, please give our readers a brief description of Vical Incorporated.
Mr. Samant: “We are
a product development company that is exclusively focused on developing vaccines for
infectious disease and cancer and all of our products are based on our patented DNA
technology, which is known as Plasmid DNA Technology. This technology actually does not
require handling of the pathogen itself but you actually use just the gene sequences from
the pathogen to invoke an immune response. Our focus is vaccines in infectious disease and
cancer and we are one of the few vaccine companies in the United States today. We are a
company that is dedicated to discovering and developing new vaccines where no vaccines
exist and doing it all with a brand new technology which is going to create a paradigm
shift in the entire vaccine business.
This is a sleeper kind of business, because it has been around for a number of years. Only
three or four companies have spent the past 60 years developing vaccines and the reason
other companies haven’t gotten into this business is because the vaccine business is
focused entirely on the basis of know how, in terms of large physical assets. Most of
these big companies have physical assets in excess of $3-$4 billion dollars. Then
proprietary knowledge is next. Know-how, proprietary knowledge and intellectual property
have kept basically a lot of the other companies out of it. Four major companies control
it; even a company like Pfizer is not in the field of vaccines.
Our goal is really to use our new innovative technology to create a paradigm shift so that
vaccine development becomes a much easier task for other companies. We are the sole owners
of this proprietary technology and if we could make vaccine development be a much easier
task, a much more cost efficient task, the timelines for developing vaccines will be much
shorter. If you go back in the history of vaccine development, about a dozen vaccines have
been introduced in this country over the last 60 years. You are talking about one vaccine
every five or six years. That’s not a very productive way of developing vaccines and
we believe that if our technology is successful in creating that paradigm shift that
we’ll develop vaccines for a number of diseases where vaccines are very badly needed
today.”
CEOCFOinterviews: What
are the percentages of focus between infectious disease and cancer?
Mr. Samant: “If you
compare infectious disease and cancer I would say they were 70-30, 70% for infectious
disease and 30% for cancer.”
CEOCFOinterviews: You
are also working in collaboration on Ebola and West Nile Virus.
Mr. Samant: “That
is correct. We are one of the largest vaccine collaborators with the National Institutes
of Health (NIH), which is a federal government organization; the federal government funds
it and it has given out a lot of a lot of monies to a lot of small biotech companies. A
lot of people claim that they are collaborating with the NIH, but most of the
collaboration is reflected through the payments that they have received from NIH. We are
really a true collaborating company with NIH; we collaborate with them in a number of
ways. They are using our core technology to develop four vaccines. Those four vaccines,
you covered two of them, Ebola, HIV, SARS and West Nile Virus. Secondly we have actually
manufactured those four vaccines, so we supply the goods to them.
In some cases we bring forth collaborative research work. One example is West Nile where
we have a CRADA, which is a collaborative agreement where the research that comes out of
our collaborative work is jointly owed by two parties, in this case NIH and Vical.
Finally, they give us money for developing an anthrax vaccine, which is our vaccine, but
they have given us so far almost $7 million for the anthrax vaccine program. They have
also given us $1 million dollars for our CMV vaccine program. We also have
commercialization rights for the Ebola vaccine from them; we have actually licensed those
rights from them. Although it is our technology, the U.S. government owns the gene
sequence for the Ebola virus and they have given us rights to use it.
We also have rights to use the gene sequence for the West Nile Virus from the CDC, which
is the Centers for Disease Control. Besides doing all of this collaboration activity, the
NIH has actually funded the major portion of our new manufacturing facility. We are very
excited because the NIH can work with a number of companies and a number of technologies,
and they have decided to use our platform to develop vaccines for some of the most
important targets.”
CEOCFOinterviews: Where
are you in clinical studies with your vaccines?
Mr. Samant: “Our
cancer vaccine, Allovectin-7 completed a Phase II trial and if everything goes through
with the FDA we will begin Phase III trial next year either on our own or in partnership
with someone else. Our CMV and anthrax vaccines are in Phase I. I hope our West Nile Virus
vaccine and our SARS vaccine with NIH will enter human trials by the end of this year.
Ebola entered clinical trials last year and our HIV vaccine collaboration with NIH is in
Phase I. Those are some of the vaccines we are doing with the NIH. The Merck HIV vaccine
is already in Phase I, with plans to go into phase II shortly. Merck is our exclusive
partner with HIV. The two angiogenesis programs are in Phase II, the one with Corautus
will enter phase IIB and hopefully if we are successful with the two programs with Aventis
Pharma, one of these programs will enter Phase III sometime next year. So, this is a
snapshot of where we are. We also have a number of animal health vaccines, which are not
approved by the FDA but are approved by the Department of Agriculture. They are in various
stages of development and those are very fast approvals.”
CEOCFOinterviews: These
are areas that seem to be a growing concern nationwide.
Mr. Samant:
“Absolutely, since your brought it up, the West Nile vaccine, although it is only
entering Phase I, can get very rapidly fast tracked for two reasons, to conduct a Phase
III trial for West Nile would be impractical because we really don’t know where the
disease actually occurs, the target becomes very large and impractical. However, all of a
sudden the West Nile Virus continues and there are a sporadic number of deaths in the
United States, the U.S. government may take a drastic measure and approve this vaccine
based on the Animal Rule. The Animal Rule is basically, showing effectiveness of this
vaccine in two animal models and then showing safety in humans and that is a way the FDA
defines for certain pathogens that are impractical to conduct a clinical trial. So if this
disease gets severe, that pathway can be opened in the U.S. government. One single
injection of our West Nile construct or a similar construct based on our technology has
shown to protect horses against a challenge. So the vaccine is very energetic with our
core technology we just have to go through the steps and see how severe this disease
is.”
CEOCFOinterviews: Is all
of your technology based on the DNA patents?
Mr. Samant: “All of
our technology is patented and all of our programs are based on our technology.”
CEOCFOinterviews: All
plasmid DNA?
Mr. Samant: “All
plasmid DNA, which is a ring of DNA, not just one ring but a multiple of rings, is
injected into the muscle cells and in that ring is coded a certain gene sequence and once
that gene sequence is taken up by the muscle cell’s nucleus, the muscle cell’s
nucleus takes the gene sequence and makes the protein that is coded in the gene
sequence.”
CEOCFOinterviews: How do
you fund all of your projects?
Mr. Samant: “First
of all, we ended the last quarter with $94 million dollars in cash. In today’s modern
environment that’s a very healthy cash balance. Our burn rate in the past has been in
the low 20’s, so there is not a panic for a company like us to go out and raise money
next year. We just raised money recently so the market is able to produce us some money.
We are very judicious on how we spend money. That is the reason why our cash balance is
very healthy. A number of our programs with NIH are basically fully funded, so, we have
the upside of being successful in the programs and at the same time we do not have to pay
for a lot of those programs. We have a healthy set of revenues from our contract
manufacturing agreements, where we supply our vaccine.
We supplied a DNA vaccine to the International AIDS Vaccine Initiative, which is a
Gates-funded organization for doing a DNA vaccine trial for HIV in China. We also do a
number of activities for the Department of Defense. So, there is cash flow coming from
revenues, which are contract manufacturing revenues; there is cash flow coming from
NIH’s grant; and we receive milestones. We have received about $50 million dollars in
milestones in the last seven years from our pharmaceutical partners. Some of those
partners which you may be aware of are Merck -- they paid us about $25 million dollars
over the past few years, Aventis Pharma, Aventis Pasteur is another, Merial, the
world’s largest animal health is a partner with us and Aqua Health, which is
developing a vaccine for fish is also a partner for us. So we have a number of companies
who have collaborated with us over the past number of years who strongly believe in the
value of this technology. So, a combination cash coming from milestones, contract
revenues, NIH grants and our own cash will support our need to take these programs to a
level of success where our investors will make more money.”
CEOCFOinterviews: As far
as manufacturing the DNA, I think it says that a gram is ready in 3-4 months, how do you
constantly keep on top of this?
Mr. Samant: “The
amount of material that goes into a dose is less than half a milligram; it is in microgram
quantities; if you make 1 gram of DNA that is a lot of DNA. If there is 1 gram of DNA that
is 1,000 milligrams or 1 million micrograms, so if you were to use 100 microgram dose
those 100 doses. The quantities in grams may sound ridiculously low from a traditional
pharmaceutical perspective but from a vaccine perspective those are pretty big
measurements.”
CEOCFOinterviews: Where
do you do all of the DNA manufacturing?
Mr. Samant: “We
have two facilities, an old one where we currently make all of our clinical supplies and
we have constructed a brand new facility which is in the process of being started up right
now and will eventually be the cornerstone of all DNA vaccine supplies.”
CEOCFOinterviews: What
do you feel was your biggest hurdle to come to this point?
Mr. Samant: “I
think the biggest hurdle was the fact that any technology you first come out with, people
get very excited about it and they expect instant gratification from a new technology. As
in any new technology it has to be debugged, improved and validated and that is a lot of
hard work and a lot of people don’t have the patience to allow the company to
complete that hard work and that has taken a lot of effort of some of our partners,
especially Merck, to take this technology to a level where we can now reap the benefits.
That technology is close to validation and it has taken almost 10 years. But we are there
now.”
CEOCFOinterviews: Are
there any other companies out there that you would like to partner with who may be able to
benefit from what you have to offer?
Mr. Samant: “Most
of our partnerships have been with companies that understand the advancements in vaccine.
Remember when I had mentioned to you the four companies that understand vaccines, they
were Merck, Aventis, Wyeth and Glaxo. These companies are keeping an eye on us because
they know we can create a paradigm shift in this business. We would really like to work
with large pharmaceutical companies who do not have a vaccine presence and would like to
get into vaccines. They are really vaccine naive, they don’t have the background and
knowledge in vaccine development, and they may have a lot of expertise in product
development and bring in a lot of cash. An example of one of these companies could be 3M
because they are a company who is trying to get into the pharmaceuticals business, has a
lot of capability in device manufacturing and has done a lot of work in pharmaceuticals
and they would be the perfect company to partner with us. There are a lot of other
companies who aren’t traditional vaccine companies that we would like to work
with.”
CEOCFOinterviews: How
about competition in your area?
Mr. Samant: “Well,
the competition is conventional vaccine methodology, which is killed vaccines, live or
attenuated vaccines and subunit vaccines; a number of companies are working on those.
Those small companies do not have the critical masses like the large four companies
to bring those products home based on their technology so they aren’t a competition
for us. The big four are basically competition because they have resources and lots of
money; however, they aren’t nimble enough to work on some of the targets we are
working on. For example, our CMV vaccine we are working on, none of the big companies are
working on it because the potential market size is too small to be attractive for them,
somewhere around $200 or $300 million dollars. The big companies will only work on vaccine
targets that will bring them a billion dollars a year. We aren’t too scared of
the big companies and the small companies -- there are a lot of them working on vaccines
using conventional methods -- and we believe they are doomed to failure.
It’s our own internal development, which is our competition. The key issue here is
focus, if we get distracted and start to work on too many things, we will lose track on
what we really set out to do. My challenge is keeping my development organization focused
in making sure to bring those vaccines that we have embarked on to the market place before
they get distracted and want to do a lot of other things, because a scientist usually and
generally likes to do a lot of other things. Our development is a very important focus and
the level of discipline that is required in that development comes with experience and
fortunately we have a lot of people with product development experience.”
CEOCFOinterviews: You
have talked about some of the smaller companies, would you consider any of them to be an
acquisition possibility?
Mr. Samant: “I have
not seen any small company in the field of vaccine area where I have gotten excited that
if we merge with them there would be a synergy or if we acquired them we would be creating
more value. Instead of acquiring companies, we need to acquire technologies and product
applications to further advance the value of these technologies that is where the goal
should be for us. I don’t see many opportunities from my end, in the law of jungle if
I am a leopard I’m looking at animal structures that are lower and comparable to me,
but if there are lions and elephants then the perspective on us may be different.”
CEOCFOinterviews: Tell
us about your vaccine developing team.
Mr. Samant:
“Developing vaccines by conventional methods is a very hard process; about 10-12
vaccines were approved in the last 60 years. That means not a lot of people were actually
apart of the vaccine development in the United States. By definition, since only 10
vaccines were approved in the last 60 years, unless you are a very old person who started
working at age 5, there is no one who is around who has seen all of the vaccines approved
in this country. There are 20-40 people in this country who have actually really
participated in the development in a vaccine that has been approved by the FDA. I have
been fortunate myself to be a part of 3 such approvals. Am I lucky? Yes, I was at the
right place at the right time and as a result I have gained a lot of experience. A number
of individuals in my organization had the chance to work on various elements of a vaccine
development, perhaps, not as comprehensively as I have done. The bottom line is that we
have a very experienced vaccine development team that I have put together in the last 3
years. I have hired people from across the world -- about 25 of the best vaccine
developing individuals in the world and we believe that besides the four major companies,
we have the best critical mass of vaccine developers in the world.”
CEOCFOinterviews: In
closing, what would you say to a potential investor?
Mr. Samant: “Anyone
can check on the management creditability. We are a very ethical company. We have no
liability, no lawsuits, no debt. We have a great management team, a topnotch board with
the level of experience that they bring. We have a brand new facility and great partners,
there isn’t much more that you would want. The company has been around for a long
time and I have been with the company since 2001.”
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