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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21088
VICAL INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 93-0948554
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9373 Towne Centre Dr., Suite 100, San Diego, California 92121
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(Address of principal executive offices) (Zip code)
(858) 646-1100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days -- Yes X No .
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JUNE 30, 2000
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<S> <C>
Common Stock, $.01 par value 19,824,030
</TABLE>
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VICAL INCORPORATED
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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COVER PAGE.............................................................................................1
TABLE OF CONTENTS......................................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of June 30, 2000, and December 31, 1999.....................................3
Statements of Operations for the Three Months Ended June 30, 2000 and 1999, and
for the Six Months Ended June 30, 2000 and 1999...............................................4
Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999......................5
Notes to Financial Statements.................................................................6
Forward-Looking Statements....................................................................8
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................................................9
ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk.....................................*
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings....................................................................*
ITEM 2. Changes in Securities................................................................*
ITEM 3. Defaults upon Senior Securities......................................................*
ITEM 4. Submission of Matters to a Vote of Security Holders.................................19
ITEM 5. Other Information....................................................................*
ITEM 6. Exhibits and Reports on Form 8-K....................................................19
SIGNATURE.............................................................................................20
EXHIBIT LIST..........................................................................................21
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* No information provided due to inapplicability of item.
2
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Part I. Financial Information
Item 1. Financial Statements
VICAL INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------- -------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 35,948,377 $ 11,149,587
Marketable securities - available-for-sale 115,288,393 26,525,181
Receivables and other 4,879,230 3,971,621
------------------- -------------------
Total current assets 156,116,000 41,646,389
------------------- -------------------
Investment, at cost 5,000,000 -
Property and Equipment:
Equipment 6,486,530 5,948,458
Leasehold improvements 2,716,997 1,646,023
------------------- -------------------
9,203,527 7,594,481
Less--accumulated depreciation and amortization (6,200,078) (5,708,349)
------------------- -------------------
3,003,449 1,886,132
------------------- -------------------
Patent costs, net of accumulated amortization 1,481,964 1,380,245
Other assets 92,973 146,470
------------------- -------------------
$ 165,694,386 $ 45,059,236
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,513,054 $ 3,839,642
Current portion of capital lease obligations 639,199 627,957
Current portion of notes payable 309,524 106,887
Current portion of deferred revenue 1,901,756 1,076,166
------------------- -------------------
Total current liabilities 6,363,533 5,650,652
------------------- -------------------
Long-Term Obligations:
Long-term obligations under capital leases 1,137,101 739,885
Notes payable 690,476 -
Deferred revenue 3,545,455 -
------------------- -------------------
Total long-term obligations 5,373,032 739,885
------------------- -------------------
Stockholders' Equity:
Preferred stock, $0.01 par value--5,000,000 shares authorized--
none outstanding - -
Common stock, $0.01 par value--40,000,000 shares authorized-- 198,240 162,011
19,824,030 and 16,201,136 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively
Additional paid-in capital 202,339,352 83,292,870
Accumulated other comprehensive loss (205,314) (140,801)
Accumulated deficit (48,374,457) (44,645,381)
------------------- -------------------
Total stockholders' equity 153,957,821 38,668,699
------------------- -------------------
Total Liabilities and Stockholders' Equity $ 165,694,386 $ 45,059,236
=================== ===================
</TABLE>
3
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VICAL INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------------- ----------------------------
2000 1999 2000 1999
-------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
License/royalty revenue $ 2,243,380 $ 610,371 $ 2,859,104 $ 3,275,706
Contract revenue 520,927 643,095 902,936 1,257,934
-------------- --------------- ------------- -------------
2,764,307 1,253,466 3,762,040 4,533,640
-------------- --------------- ------------- -------------
Operating Expenses:
Research and development 4,710,412 3,737,835 9,027,300 7,352,063
General and administrative 1,309,890 1,121,793 2,639,762 2,134,735
-------------- --------------- ------------- -------------
6,020,302 4,859,628 11,667,062 9,486,798
-------------- --------------- ------------- -------------
Loss from operations (3,255,995) (3,606,162) (7,905,022) (4,953,158)
Interest income 2,472,352 568,086 4,249,460 1,139,260
Interest expense 34,799 30,115 73,514 63,338
-------------- --------------- ------------- -------------
Net loss $ (818,442) $ (3,068,191) $ (3,729,076) $ (3,877,236)
============== =============== ============= ==============
Net loss per share (basic and diluted--Note 2) $ (0.04) $ (0.19) $ (0.19) $ (0.24)
============== =============== ============= ==============
Weighted average shares used in computing net loss per share 19,822,669 16,190,840 19,422,295 16,072,318
============== =============== ============= =============
(Note 2)
</TABLE>
4
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VICAL INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
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2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ............................................................ $ (3,729,076) $ (3,877,236)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................................... 555,927 530,592
Change in operating assets and liabilities:
Receivables and other ........................................... (907,609) 94,042
Accounts payable and accrued expenses ........................... (326,588) (137,648)
Deferred revenue ................................................ (628,955) 685,276
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Net cash used in operating activities ..................... (5,036,301) (2,704,974)
------------- -------------
INVESTING ACTIVITIES:
Marketable securities ............................................... (88,827,725) (3,951,650)
Capital expenditures ................................................ (878,888) (159,985)
Deposits and other .................................................. 53,454 14,493
Patent expenditures ................................................. (149,285) (145,447)
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Net cash used in investment activities .................... (89,802,444) (4,242,589)
------------- -------------
FINANCING ACTIVITIES:
Issuance of common stock, net ....................................... 119,082,711 4,844,357
Payments on notes payable ........................................... (106,474) (106,886)
Proceeds from notes payable ......................................... 999,587 --
Principal payments under capital lease obligations .................. (338,289) (250,593)
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Net cash provided from financing activities ............... 119,637,535 4,486,878
------------- -------------
Net increase (decrease) in cash and cash equivalents .................. 24,798,790 (2,460,685)
Cash and cash equivalents at beginning of period ...................... 11,149,587 13,567,817
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Cash and cash equivalents at end of period ............................ $ 35,948,377 $ 11,107,132
============= =============
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Investment in preferred stock of Vascular Genetics Inc. in exchange
for grant of license ......................................... $ 5,000,000 $ --
============= =============
Equipment acquired under capital leases ........................... $ 746,746 $ 383,766
============= =============
</TABLE>
5
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VICAL INCORPORATED
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Vical was incorporated in April 1987 and has devoted substantially all
of its resources since that time to its research and development programs. We
are currently focusing our resources on the development of our naked DNA and
related technologies.
BASIS OF PRESENTATION
The information contained herein has been prepared in accordance with
instructions for Form 10-Q. The information at June 30, 2000, and for the
three-month and six-month periods ended June 30, 2000 and 1999, is unaudited. In
the opinion of management, the information reflects all adjustments necessary to
present fairly the financial position and results of operations for the interim
periods. All such adjustments are of a normal recurring nature. Interim results
are not necessarily indicative of results for a full year. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. For a presentation including all disclosures required by
generally accepted accounting principles, these financial statements should be
read in conjunction with the audited financial statements for the year ended
December 31, 1999, included in the Vical Incorporated Form 10-K filed with the
Securities and Exchange Commission.
2. NET LOSS PER SHARE
Net loss per share (basic and diluted) for the three-month and
six-month periods ended June 30, 2000 and 1999, has been computed using the
weighted average number of common shares outstanding during the respective
periods. Diluted loss per share does not include any assumed exercise of stock
options as the effect would be antidilutive.
3. COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive loss represents unrealized loss on
marketable securities. For the three-month periods ended June 30, 2000 and 1999,
other comprehensive gain (loss) was $28,617 and $(109,835), respectively, and
total comprehensive loss was $679,107 and $3,178,026, respectively. For the
six-month periods ended June 30, 2000 and 1999, other comprehensive loss was
$64,513 and $161,922, respectively, and total comprehensive loss was $3,682,871
and $4,039,158, respectively.
4. PUBLIC STOCK OFFERING
In January 2000, Vical sold 3,450,000 shares of common stock in a
public offering which raised net proceeds of approximately $117.5 million.
5. LICENSE AGREEMENTS
On June 30, 2000, Vical and Aventis Pharma, the pharmaceutical
company of Aventis S.A., entered into a license agreement granting Aventis
Pharma rights to use Vical's naked DNA gene transfer technology to deliver a
growth factor gene for which Aventis Pharma holds rights. The agreement
resulted in an initial payment to Vical of $1.5 million in July 2000, and
could generate milestone payments plus royalties if products advance through
commercialization. Vical accrued $1.5 million of revenue in June 2000 for
this agreement.
6
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On February 24, 2000, Vical and Human Genome Sciences, Inc. (HGS)
signed a reciprocal royalty-bearing license. Under the agreement, Vical has the
option to exclusively license up to three genes from HGS for gene-based product
development. HGS has the option to license Vical's naked DNA gene delivery
technology for use in up to three gene-based products. In addition, Vical
granted an exclusive, royalty-bearing license to Vascular Genetics, Inc. (VGI),
a company in which HGS is a major shareholder, for naked DNA delivery of a gene
with potential use for revascularization. In exchange, Vical received shares of
Preferred Stock Series B of Vascular Genetics, Inc. This investment was recorded
at estimated fair value of $5.0 million on the date of investment and is
reflected as Investment, at cost, in the accompanying balance sheet. The
investment is being accounted for on the cost method. Vical also recorded a
liability for deferred revenue of $5.0 million. This deferred revenue is being
recognized ratably each month through September 30, 2004.
6. COMMITMENTS
Vical expanded its leased space by approximately 5,100 square feet in
one facility effective June 1, 2000, by amending an existing lease agreement.
Total monthly rental on all facilities, including common area maintenance costs,
is approximately $125,000 effective June 1, 2000. This lease amendment increased
our minimum lease commitments by approximately $938,000 through the end of the
lease in November 2004.
At June 30, 2000, we had borrowed $1.0 million under the $1.0 million
line of credit with a bank to finance certain leasehold improvements.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 -
"Revenue Recognition," or SAB 101. SAB 101 reflects the SEC's views on revenue
recognition. Historically Vical has recognized revenue from initial technology
option and license fees in the period in which the agreement was signed if there
were no significant performance obligations remaining. Revenue from milestone
payments is recognized as revenue when the milestones are achieved. SAB 101
would require that when there has not been the culmination of the earnings
process, revenue from technology option and license fees and milestone payments
be deferred and recognized over the period over which the revenue is deemed to
be earned. There is a lack of guidance about applying SAB 101 in the Life
Sciences Industry, including what constitutes the culmination of the earnings
process where there are up-front, milestone and royalty payments. Further, there
is significant uncertainty about the life over which to recognize this revenue,
particularly where royalties continue to be payable until the last related
patent expires. There is no written guidance to determine whether it would be
acceptable to amortize the revenue over the estimated product development
period, which is a shorter period than the estimated life of the patents. Due to
the uncertainties noted above, we have not completed our evaluation of the
impact of SAB 101 on our financial statements, however, the potential impact is
expected to be material to the financial statements. Effective from 1991, when
our first license fee revenues were recognized, to June 30, 2000, Vical has
recognized cumulative license fee revenue representing nonrefundable up-front
and milestone payments of approximately $38 million which will have to be
evaluated for deferral under SAB 101. The amount that will need to be deferred
will depend principally on the estimated life over which we are allowed to
recognize the revenue under SAB 101.
When the company implements SAB 101 in the fourth quarter of 2000, it will do so
by restating the first quarter 2000 statements. The statement of operations will
reflect a one-time charge to earnings for the cumulative effect of the change in
accounting principle as of January 1, 2000, and license revenues will be
recognized based on the new accounting principle effective as of that date. The
financial statements for the second and third quarters of 2000 will also be
restated to apply the new accounting principle effective January 1, 2000.
7
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FORWARD-LOOKING STATEMENTS
The statements incorporated by reference or contained in this report
discuss our future expectations, contain projections of our results of
operations or financial condition, and include other "forward-looking"
information within the meaning of Section 27A of the Securities Act of 1933, as
amended. Our actual results may differ materially from those expressed in
forward-looking statements made or incorporated by reference in this report.
Forward-looking statements that express our beliefs, plans, objectives,
assumptions or future events or performance may involve estimates, assumptions,
risks and uncertainties. Therefore, our actual results and performance may
differ materially from those expressed in the forward-looking statements.
Forward-looking statements often, although not always, include words or phrases
such as the following:
- "will likely result,"
- "are expected to,"
- "will continue,"
- "is anticipated,"
- "estimate,"
- "intends,"
- "plans,"
- "projection," and
- "outlook."
You should not unduly rely on forward-looking statements contained or
incorporated by reference in this report. Actual results or outcomes may differ
materially from those predicted in our forward-looking statements due to the
risks and uncertainties inherent in our business, including risks and
uncertainties in:
- clinical trial results,
- obtaining and maintaining regulatory approval,
- market acceptance of and continuing demand for our products,
- the attainment of patent protection for any of these products,
- the impact of competitive products, pricing and reimbursement
policies,
- our ability to obtain additional financing to support our
operations,
- the continuation of our corporate collaborations, and
- changing market conditions and other risks detailed below.
You should read and interpret any forward-looking statements together
with the following documents:
- our Annual Report on Form 10-K,
- the risk factors contained in this report under the caption
"Risk Factors," and
- our other filings with the Securities and Exchange Commission.
Any forward-looking statement speaks only as of the date on which that
statement is made. We will not update any forward-looking statement to reflect
events or circumstances that occur after the date on which such statement is
made.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We were incorporated in April 1987 and have devoted substantially all
of our resources since that time to our research and development programs. To
date, we have not received revenues from the sale of products. We expect to
incur substantial operating losses for at least the next few years, due
primarily to the expansion of our research and development programs and the cost
of preclinical studies and clinical trials. Losses may fluctuate from quarter to
quarter as a result of differences in the timing of expenses incurred and the
revenues received from collaborative agreements. Such fluctuations may be
significant. As of June 30, 2000, our accumulated deficit was approximately
$48.4 million.
We develop biopharmaceutical products based on our patented naked DNA
gene transfer technologies for the prevention and treatment of life-threatening
diseases. We currently focus our development on innovative cancer therapies to
induce an immune response against cancer cells without causing serious side
effects. We have retained all rights to our internally developed cancer product
candidates.
We enter into collaborations with major pharmaceutical companies to
leverage our technologies primarily for non-cancer applications such as vaccines
for infectious diseases and optimized delivery of therapeutic proteins. We have
established relationships through the license of our technology with a growing
number of corporate partners and collaborators.
Vical has formulated Allovectin-7(Registration Mark), a complex
containing the gene encoding a particular human histocompatibility antigen,
HLA-B7, and a lipid material to facilitate gene uptake. After direct
injection of Allovectin-7(Registration Mark) into a tumor, we believe that
the HLA-B7 gene will cause the tumor cells to produce the HLA-B7 antigen.
This gene expression may then trigger a potent cellular immune response
against the tumor cells. The treatment may also trigger an immune response
against additional tumor cells, both locally and systemically, by exposing
other features of the tumor cells to the immune system. Allovectin
7(Registration Mark) is in Phase III and Phase II registration trials for
patients with advanced metastatic malignant melanoma, an aggressive form of
skin cancer. The Phase III trial is progressing toward possible completion in
the first part of 2001. Allovectin 7(Registration Mark) is also in Phase II
clinical testing for patients with cancer of the head and neck. Based on
recently reported data, Vical is planning a new Phase II study in patients
with earlier-stage head and neck cancer.
Vical is developing its second gene-based product candidate, LEUVECTIN,
also intended for direct injection into tumor lesions of cancer patients.
LEUVECTIN contains a gene that encodes the potent immunostimulator IL-2 and a
lipid material to facilitate gene uptake. We expect that LEUVECTIN, when
injected into tumors, will cause the malignant cells to produce and secrete IL-2
in the vicinity of the tumor, stimulating the patient's immune system to attack
and destroy tumor cells. Because LEUVECTIN is designed to deliver IL-2 only at
the site of tumor lesions, we believe that it may provide efficacy similar to
systemic IL-2 therapy with fewer side effects. LEUVECTIN is in Phase II clinical
trials for patients with advanced metastatic kidney cancer and for high-risk
patients with locally confined prostate cancer.
VAXID, a cancer vaccine intended to prevent recurrence of low-grade,
non-Hodgkin's B-cell lymphoma, is in a Phase I/II clinical trial in a
collaboration with Stanford University Medical Center. We are supporting
clinical testing of a cancer vaccine for the treatment of advanced metastatic
melanoma in a collaboration with the National Cancer Institute, or NCI.
We are developing our cancer product candidates internally, while
developing vaccine product candidates for infectious diseases primarily in
collaboration with corporate partners Merck and Aventis Pasteur. We have a
license agreement allowing Centocor to use our naked DNA technology to develop
and market gene-based vaccines for the potential treatment of types of cancer.
We have an agreement with Boston Scientific for the use of our technology in
catheter-based intravascular gene delivery. We have an agreement with Aventis
Pharma to use our gene delivery technology to deliver neurological
proteins for neurodegenerative diseases. We have agreements with Pfizer for use
of our technology for
9
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DNA-based delivery of therapeutic proteins in animal health applications and
with Merial for use of our technology for DNA vaccines in animal infectious
disease targets.
In February 2000, Vical and Human Genome Sciences, Inc., or HGS, signed
a reciprocal royalty-bearing license. Under the agreement, Vical has the option
to license exclusively up to three genes from HGS for gene-based product
development. HGS has the option to license Vical's patented naked DNA gene
delivery technology for use in up to three gene-based products. In addition, we
granted an exclusive, royalty-bearing license to Vascular Genetics Inc., or VGI,
a company in which HGS is a major shareholder, for naked DNA delivery of
Vascular Endothelial Growth Factor-2, a protein with potential use for
revascularization.
Effective June 30, 2000, Alain B. Schreiber, M.D., President and CEO,
and member of the Board of Directors, left the company, and the Board of
Directors has commenced a search for a replacement. During the transition, R.
Gordon Douglas, Jr., M.D., Chairman of the Board of Vical, is assuming a more
active role in managing the strategic direction of the Company. Deirdre Y.
Gillespie, M.D., formerly Executive Vice President and Chief Business Officer,
was elected Chief Operating Officer and assumed additional operating
responsibilities.
In May 2000, an independent Drug Safety Review Board recommended that
current Phase II and Phase III registration trials targeting metastatic melanoma
should progress as planned, based on a review of safety and preliminary efficacy
data collected to date.
On June 30, 2000, Vical and Aventis Pharma, the pharmaceutical company
of Aventis S.A., entered into a license agreement granting Aventis Pharma rights
to use Vical's naked DNA gene transfer technology to deliver a growth factor
gene for which Aventis Pharma holds rights. The agreement resulted in an initial
payment to Vical of $1.5 million in July 2000, and could generate milestone
payments plus royalties if products advance through commercialization. Vical
accrued $1.5 million of revenue in June 2000 for this agreement.
In June 2000, Vical and the Office of Naval Research amended their
existing agreement for the development of a potential naked DNA vaccine to
prevent malaria. The amendment increased the total contract amount from
$2,813,000 to $5,462,000 through December 31, 2000.
We have licensed our naked DNA vaccination technology to Merck for a
total of seven preventive vaccine targets:
- hepatitis B virus, HBV,
- hepatitis C virus, HCV,
- human immunodeficiency virus, HIV,
- human papilloma virus, HPV,
- herpes simplex virus, HSV,
- influenza virus, and
- tuberculosis, TB.
In addition, Merck also has a license covering three therapeutic
vaccine targets, HBV, HIV and HPV.
Merck initiated a clinical trial in December 1999 with a vaccine using
Vical's patented naked DNA technology to protect against infection by human
immunodeficiency virus, or HIV, the virus that causes acquired immunodeficiency
syndrome.
We also have a license and option agreement with Aventis Pasteur for a
total of six preventive vaccine targets:
- cytomegalovirus, CMV,
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- Helicobacter pylori,
- Lyme disease,
- malaria,
- respiratory syncytial virus, RSV, and
- varicella zoster virus, VZV.
Vical is collaborating with Aventis Pasteur and the U.S. Naval Medical
Research Center, or NMRC, to develop a DNA vaccine against malaria. Results from
a Phase I clinical trial with approximately twenty volunteers indicated that
subjects immunized with a potential malaria DNA vaccine developed dose-related
killer T-cell immune responses. As a result of these data, further clinical
development is planned.
Vical's product candidates or those of our collaborators may not prove
to be safe and effective in clinical trials and no commercially successful
products may ultimately be developed by Vical or our collaborators.
RESULTS OF OPERATIONS
Revenues of $2,764,000 were recorded for the quarter ended June 30,
2000. License revenue of $2,243,000 primarily represented $1,500,000 of license
fees accrued for a June 2000 license agreement with Aventis Pharma. License
revenue also included recognition of deferred license fees of $473,000 from
Merial and Vascular Genetics Inc., and royalty and other revenue of $270,000.
Contract and grant revenue of $521,000 included revenues from a contract with
the Office of Naval Research for the development work on a potential naked DNA
vaccine to prevent malaria, revenue from grants and contracts with NIH, and
revenue from Pfizer. In June 2000, Vical and the Office of Naval Research
amended their existing agreement and increased the total contract to $5,462,000
through December 31, 2000. Through June 30, 2000, Vical had recognized revenue
of $2,814,000 of the total contract amount.
Revenues of $1,253,000 were recorded for the quarter ended June 30,
1999. License revenue primarily represented recognition of deferred license fees
of $275,000 from Merial and royalty revenue of $281,000. Contract revenue
recognized was $643,000, and was primarily from a contract with the Office of
Naval Research.
Revenues for the six months ended June 30, 2000, were $3,762,000. In
addition to the revenue recognized in the second quarter of 2000, license
revenue for the six months ended June 30, 2000, included recognition of deferred
license fees of $366,000 from Merial and Vascular Genetics Inc., and royalty and
other revenue of $250,000. Contract and grant revenue recognized for the six
months ended June 30, 2000, in addition to the amounts recognized in the second
quarter of 2000, included $382,000 of revenues from the contract with the Office
of Naval Research, revenue from grants with NIH, and revenue from Pfizer and
other agreements.
Revenues for the six months ended June 30, 1999, were $4,534,000. In
addition to the revenue recognized in the second quarter of 1999, revenue for
the six months ended June 30, 1999, included $1.0 million of license fee and
$1.2 million of equity premium under January 1999 agreements with Pfizer Inc.,
recognition of deferred license fees of $250,000 from Merial, royalty revenue of
$215,000 and contract revenue of $615,000 primarily from the Office of Naval
Research.
Our total operating expenses for the quarter ended June 30, 2000, were
$6,020,000 compared with $4,860,000 for the second quarter of 1999. Total
operating expenses for the six months ended June 30, 2000 and 1999, were
$11,667,000 and $9,487,000, respectively. Research and development
expenses increased to $4,710,000 for the three months ended June 30, 2000, from
$3,738,000 for the same period in 1999. For the six months ended June 30, 2000,
research and development expenses were $9,027,000 compared with $7,352,000 for
the same period in 1999. The increase in research and development expenses
generally was due to increased preclinical and clinical trial costs, and
personnel-related costs.
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General and administrative expenses increased to $1,310,000 for the
three months ended June 30, 2000, from $1,122,000 for the same period in 1999.
General and administrative expenses for the six months ended June 30, 2000, were
$2,640,000 compared with $2,135,000 for the same period in 1999. The increase
primarily is attributable to increased personnel-related costs in support of the
expanded research and development activities.
Investment income for the three-month and six-month periods ended June
30, 2000, was $2,472,000 and $4,249,000, respectively. Investment income for the
three-month and six-month periods ended June 30, 1999, was $568,000 and
$1,139,000, respectively. The increase is a result of higher investment balances
due to the January 2000 sale of 3,450,000 shares of Vical common stock in a
public offering which raised net proceeds of approximately $117.5 million.
The net loss was $0.04 per share for the three months ended June 30,
2000, and $0.19 for the three months ended June 30, 1999. For the six months
ended June 30, 2000, the net loss was $0.19 per share compared with a net loss
of $0.24 per share for the same period in the prior year. We expect to incur
losses throughout the remainder of 2000 and to report a net loss for the year
ending December 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Vical has financed its operations primarily
through private placements of preferred and common stock, four public offerings
of common stock and revenues from collaborative agreements. In January 2000,
Vical sold 3,450,000 shares of common stock in a public offering which raised
net proceeds of approximately $117.5 million. The net proceeds were invested in
marketable securities and cash equivalents during the first quarter. As of June
30, 2000, we had working capital of approximately $149.9 million compared with
$36.0 million at December 31, 1999. Cash and marketable securities totaled
approximately $151.2 million at June 30, 2000, compared with $37.7 million at
December 31, 1999. We have an unsecured line of credit agreement with a bank to
provide financing for leasehold improvements. Under the terms of the agreement,
we borrowed up to the credit limit of $1,000,000 at June 30, 2000.
We expect to incur substantial additional research and development
expenses and general and administrative expenses, including continued increases
in personnel costs, costs related to preclinical testing and clinical trials,
outside services and facilities. Our future capital requirements will depend on
many factors, including continued scientific progress in our research and
development programs, the scope and results of preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the cost of manufacturing scale-up, and
commercialization activities and arrangements. We intend to seek additional
funding through research and development relationships with suitable potential
corporate collaborators. We may also seek additional funding through public or
private financings. We cannot assure that additional financing will be available
on favorable terms or at all.
If additional funding is not available, Vical anticipates that its
available cash and existing sources of funding will be adequate to satisfy its
operating needs through at least 2002.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 -
"Revenue Recognition," or SAB 101. SAB 101 reflects the SEC's views on revenue
recognition. Historically Vical has recognized revenue from initial technology
option and license fees in the period in which the agreement was signed if
there were no significant performance obligations remaining. Revenue from
milestone payments is recognized as revenue when the milestones are achieved.
SAB 101 would require that when there has not been the culmination of the
earnings process, revenue from technology option and license fees and milestone
payments be deferred and recognized over the period over which the revenue is
deemed to be earned. There is a lack of guidance about applying SAB 101 in the
Life Sciences Industry, including what constitutes the culmination of the
earnings process where there are up-front, milestone and royalty payments.
Further, there is significant uncertainty about the life over which to recognize
this revenue, particularly where royalties continue to be payable until the last
related patent expires. There is no written guidance to determine whether it
would be acceptable to amortize the revenue over the estimated product
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development period, which is a shorter period than the estimated life of the
patents. Due to the uncertainties noted above, we have not completed our
evaluation of the impact of SAB 101 on our financial statements, however, the
potential impact is expected to be material to the financial statements.
Effective from 1991, when our first license fee revenues were recognized, to
June 30, 2000, Vical has recognized cumulative license fee revenue representing
nonrefundable up-front and milestone payments of approximately $38 million which
will have to be evaluated for deferral under SAB 101. The amount that will need
to be deferred will depend principally on the estimated life over which we are
allowed to recognize the revenue under SAB 101.
When the company implements SAB 101 in the fourth quarter of 2000, it will do so
by restating the first quarter 2000 statements. The statement of operations will
reflect a one-time charge to earnings for the cumulative effect of the change in
accounting principle as of January 1, 2000, and license revenues will be
recognized based on the new accounting principle effective as of that date. The
financial statements for the second and third quarters of 2000 will also be
restated to apply the new accounting principle effective January 1, 2000.
RISK FACTORS
You should carefully consider the risks described below, together with
all of the other information included in this report, before deciding whether to
invest in our common stock. If any of the following risks actually occurs, our
business, financial condition or results of operations could be harmed. In this
case, the trading price of our common stock could decline, and you may lose all
or part of your investment.
NONE OF OUR PRODUCTS HAVE BEEN APPROVED FOR SALE. IF WE DO NOT DEVELOP
COMMERCIALLY SUCCESSFUL PRODUCTS, WE MAY BE FORCED TO CURTAIL OR CEASE
OPERATIONS.
Very little data exists regarding the safety and efficacy of DNA
therapeutics. All of our potential products are either in research or
development. We must conduct a substantial amount of additional research and
development before any U.S. or foreign regulatory authority will approve any of
our products. Results of our research and development activities may indicate
that our potential products are unsafe or ineffective. In this case, regulatory
authorities will not approve them. Even if approved, our products may not be
commercially successful. If we fail to develop and commercialize our products,
we will not be successful.
WE HAVE A HISTORY OF NET LOSSES. WE EXPECT TO CONTINUE TO INCUR NET
LOSSES AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We have not sold any products and do not expect to sell any products
for the next few years. For the period from our inception to June 30, 2000, we
have incurred cumulative net losses totaling approximately $48.4 million.
Moreover, our negative cash flow and losses from operations will continue and
increase for the foreseeable future. We may never generate sufficient product
revenue to become profitable. We also expect to have quarter-to-quarter
fluctuations in revenues, expenses and losses, some of which could be
significant.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE. IF ADDITIONAL CAPITAL IS
NOT AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
We may need to raise more money to continue the research and
development necessary to bring our products to market and to establish
manufacturing and marketing capabilities. We may seek additional funds through
public and private stock offerings, arrangements with corporate partners,
borrowings under lease lines of credit or other sources. In the event that we
need more money, but are unable to raise more money we may have to reduce our
capital expenditures, scale back our development of new products, reduce our
workforce and license to others products or technologies that we otherwise would
seek to commercialize ourselves. The amount of money we may need will depend on
many factors, including:
- the progress of our research and development programs,
- the scope and results of our preclinical studies and clinical
trials,
- the time and costs involved in:
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- obtaining necessary regulatory approvals,
- filing, prosecuting and enforcing patent claims,
- scaling up our manufacturing capabilities, and
- the commercial arrangements we may establish.
THE REGULATORY APPROVAL PROCESS IS EXPENSIVE, TIME CONSUMING AND
UNCERTAIN WHICH MAY PREVENT US FROM OBTAINING REQUIRED APPROVALS FOR
THE COMMERCIALIZATION OF OUR PRODUCTS.
Testing of the potential drugs we develop is regulated by numerous
governmental authorities in the United States and other countries. The
regulations are evolving and uncertain. The regulatory process can take many
years and require us to expend substantial resources. For example: o the U.S.
Food and Drug Administration, the FDA, has not established guidelines concerning
the scope of clinical trials required for DNA therapeutics, o the FDA has not
indicated how many patients it will require to be enrolled in clinical trials to
establish the safety and efficacy of DNA therapeutics, and o current regulations
are subject to substantial review by various governmental agencies.
Therefore, U.S. or foreign regulations could prevent or delay
regulatory approval of our products or limit our ability to develop and
commercialize our products. Delays could:
- impose costly procedures on our activities,
- diminish any competitive advantages that we attain, and
- negatively affect our ability to receive royalties.
We believe that the FDA and comparable foreign regulatory bodies will
regulate separately each product containing a particular gene depending on its
intended use. Presently, to commercialize any product we must sponsor and file a
regulatory application for each proposed use. We then must conduct clinical
studies to demonstrate the safety and efficacy of the product necessary to
obtain FDA approval. The results obtained so far in our clinical trials may not
be replicated in our on-going or future trials. This may prevent any of our
potential products from receiving FDA approval.
We use recombinant DNA molecules in our product candidates, and
therefore we also must comply with guidelines instituted by the National
Institutes of Health, the NIH, and its Recombinant DNA Advisory Committee.
The NIH could restrict or delay the development of our products.
ADVERSE EVENTS IN THE FIELD OF GENE THERAPY, OR WITH RESPECT TO OUR
POTENTIAL PRODUCTS, MAY NEGATIVELY IMPACT REGULATORY APPROVAL OR PUBLIC
PERCEPTION OF OUR PRODUCTS.
The death of a patient undergoing a viral-based gene therapy at the
University of Pennsylvania in an investigator-sponsored trial has been widely
publicized. This death and other adverse events in the field of gene therapy
could result in greater governmental regulation of gene therapies, including our
non-viral naked DNA technology, and potential regulatory delays relating to the
testing or approval of our potential products. In addition, the field of gene
therapy is under increased scrutiny, which may affect our product development
efforts or clinical trials.
For example, one patient who had undergone treatment with
Allovectin-7(Registration Mark) for advanced metastatic melanoma died more
than two months later of progressive disease and numerous other factors,
after receiving multiple other cancer therapies. The death was originally
reported as unrelated to the treatment. Following an autopsy, the death was
reclassified as "probably related" to the treatment because the possibility
could not be ruled out. We do not believe Allovectin-7(Registration Mark) was
a significant factor in the patient's death.
The commercial success of our potential products will depend in part on
public acceptance of the use of gene therapies for the prevention or treatment
of human diseases. Public attitudes may be
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influenced by claims that gene therapies are unsafe and our naked DNA
therapeutics may not gain the acceptance of the public or the medical
community. Negative public reaction to adverse events in our trials or gene
therapy in general could result in greater government regulation and stricter
labeling requirements of gene therapies, including our naked DNA therapeutics,
and could cause a decrease in the demand for any products we may develop.
OUR PATENTS AND PROPRIETARY RIGHTS MAY NOT PROVIDE US WITH ANY BENEFIT
AND THE PATENTS OF OTHERS MAY PREVENT US FROM COMMERCIALIZING OUR
PRODUCTS.
Patents may not issue from any of our current applications. Moreover,
if patents do issue, governmental authorities may not allow claims sufficient to
protect our technology. Finally, others may challenge or seek to circumvent or
invalidate patents that are issued to us or to licensors of our technology. In
that event, the rights granted under patents may be inadequate to protect our
proprietary technology or to provide any commercial advantage.
Our core DNA delivery technology is covered by a patent issued in
Europe which is being opposed by several companies under European patent
procedures. If we are not successful in this opposition proceeding we may lose
part or all of our proprietary protection on our potential products in Europe.
Others may have or may receive patents which contain claims applicable
to our products. These patents may impede our ability to commercialize products.
THE LEGAL PROCEEDINGS TO OBTAIN PATENTS AND LITIGATION OF THIRD-PARTY
CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT COULD REQUIRE US TO SPEND
MONEY AND COULD IMPAIR OUR OPERATIONS.
Our success will depend in part on our ability to obtain patent
protection for our products and processes both in the United States and in other
countries. The patent positions of biotechnology and pharmaceutical companies,
however, can be highly uncertain and involve complex legal and factual
questions. Therefore, it is difficult to predict the breadth of claims allowed
in the biotechnology and pharmaceutical fields.
We also rely on protecting our proprietary technology in part through
confidentiality agreements with our corporate collaborators, employees,
consultants and certain contractors. These agreements may be breached and we may
not have adequate remedies for any breach. In addition, our trade secrets may
otherwise become known or independently discovered by our competitors.
Protecting intellectual property rights can be very expensive.
Litigation may be necessary to enforce a patent issued to us or to determine the
scope and validity of third-party proprietary rights. Moreover, if a competitor
were to file a patent application claiming technology also invented by us, we
would have to participate in an interference proceeding before the U.S. Patent
and Trademark Office or in a foreign counterpart to determine the priority of
the invention. We may be drawn into interferences with third parties or may have
to provoke interferences ourselves to unblock third party patent rights so as to
allow us or our licensees to commercialize products based on our technology.
Litigation could result in substantial costs and the diversion of management's
efforts regardless of the results of the litigation. An unfavorable result in
litigation could subject us to significant liabilities to third parties, require
disputed rights to be licensed or require us to cease using some technology.
Our products and processes may infringe, or be found to infringe on,
patents not owned or controlled by us. We do not know whether any patents held
by others will require us to alter our products or processes, obtain licenses,
or stop activities. If relevant claims of third-party patents are upheld as
valid and enforceable, we could be prevented from practicing the subject matter
claimed in the patents, or may be required to obtain licenses or redesign our
products or processes to avoid infringement. A number of genetic sequences or
proteins encoded by genetic sequences that we are investigating are, or may
become, patented by others. As a result, we may have to obtain licenses to test,
use or market these products. Our business will suffer if we are not able to
obtain licenses at all or on terms commercially reasonable to us and we may not
be able to redesign our products or processes to avoid infringement.
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COMPETITION AND TECHNOLOGICAL CHANGE MAY MAKE OUR POTENTIAL PRODUCTS
AND TECHNOLOGIES LESS ATTRACTIVE OR OBSOLETE.
We compete with companies, including major pharmaceutical and
biotechnology firms, that are pursuing other forms of treatment or prevention
for the diseases we target. We also may experience competition from companies
that have acquired or may acquire technology from universities and other
research institutions. As these companies develop their technologies, they may
develop proprietary positions which may prevent us from successfully
commercializing products.
Some of our competitors are established companies with greater
financial and other resources than we have. Other companies may succeed in
developing products earlier than we do, obtaining FDA approval for products more
rapidly than we do, or developing products that are more effective than those we
propose to develop. While we will seek to expand our technological capabilities
to remain competitive, research and development by others will seek to render
our technology or products obsolete or noncompetitive or result in treatments or
cures superior to any therapy developed by us. Additionally, consumers may not
prefer therapies developed by us over existing or newly developed therapies.
THE METHOD OF ADMINISTRATION OF SOME OF OUR POTENTIAL PRODUCTS CAN
CAUSE ADVERSE EVENTS IN PATIENTS, INCLUDING DEATH.
Some of our potential products are designed to be injected directly
into malignant tumors. There are medical risks inherent in direct tumor
injections. For example, in clinical trials of our potential products, attending
physicians have punctured patients' lungs in less than one percent of
procedures, requiring hospitalization. In addition, a physician administering
our product in an investigator-sponsored clinical trial inadvertently damaged
tissue near the heart of a patient which may have precipitated the patient's
death. These events are reported as adverse events in our clinical trials and
illustrate the medical risks related to direct injection of tumors. These risks
may adversely impact market acceptance of some of our products.
COMMERCIALIZATION OF SOME OF OUR POTENTIAL PRODUCTS DEPENDS ON
COLLABORATIONS WITH OTHERS. IF OUR COLLABORATORS ARE NOT SUCCESSFUL OR
IF WE ARE UNABLE TO FIND COLLABORATORS IN THE FUTURE, WE MAY NOT BE
ABLE TO DEVELOP THESE PRODUCTS.
Our strategy for the research, development and commercialization of
some of our product candidates requires us to enter into contractual
arrangements with corporate collaborators, licensors, licensees and others. Our
success depends upon the performance by these collaborators of their
responsibilities under these arrangements. Some collaborators may not perform
their obligations as we expect or we may not derive any revenue from these
arrangements.
We have collaborative agreements with several pharmaceutical companies.
We do not know whether these companies will successfully develop and market any
products under their respective agreements. Moreover, some of our collaborators
are also researching competing technologies to treat the diseases targeted by
our collaborative programs. We may be unsuccessful in entering into other
collaborative arrangements to develop and commercialize our products.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN
ADDITIONAL PERSONNEL, WE MAY NOT BE ABLE TO PURSUE COLLABORATIONS OR
DEVELOP OUR OWN PRODUCTS.
We are highly dependent on the principal members of our scientific,
manufacturing, marketing and management personnel, the loss of whose services
might significantly delay or prevent the achievement of our objectives. We face
competition from other companies, academic institutions, government entities and
other organizations in attracting and retaining personnel.
WE MAY NOT BE ABLE TO MANUFACTURE PRODUCTS ON A COMMERCIAL SCALE.
We have limited experience in manufacturing our product candidates in
commercial quantities. We may be dependent initially on corporate partners,
licensees or others to manufacture our products commercially. We also will be
required to comply with extensive regulations applicable to manufacturing
facilities. We may be unable to enter into any arrangement for the manufacture
of our products.
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WE HAVE NO MARKETING OR SALES EXPERIENCE, AND IF WE ARE UNABLE TO
DEVELOP OUR OWN SALES AND MARKETING CAPABILITY, WE MAY NOT BE
SUCCESSFUL IN COMMERCIALIZING OUR PRODUCTS.
Our current strategy is to market our proprietary cancer products
directly in the United States, but we currently do not possess pharmaceutical
marketing or sales capabilities. In order to market and sell our proprietary
cancer products, we will need to develop a sales force and a marketing group
with relevant pharmaceutical experience, or make appropriate arrangements with
strategic partners to market and sell these products. Developing a marketing and
sales force is expensive and time consuming and could delay any product launch.
Our inability to successfully employ qualified marketing and sales personnel and
develop our sales and marketing capabilities will harm our business.
HEALTH CARE REFORM AND RESTRICTIONS ON REIMBURSEMENT MAY LIMIT OUR
RETURNS ON POTENTIAL PRODUCTS.
Our ability to earn sufficient returns on our products will depend in
part on the extent to which reimbursement for our products and related
treatments will be available from:
- government health administration authorities,
- private health coverage insurers,
- managed care organizations, and
- other organizations.
If we fail to obtain appropriate reimbursement, it could prevent us
from successfully commercializing our potential products.
There are efforts by governmental and third party payors to contain or
reduce the costs of health care through various means. We expect that there will
continue to be a number of legislative proposals to implement government
controls. The announcement of proposals or reforms could impair our ability to
raise capital. The adoption of proposals or reforms could impair our business.
Additionally third party payors are increasingly challenging the price
of medical products and services. If purchasers or users of our products are not
able to obtain adequate reimbursement for the cost of using our products, they
may forego or reduce their use. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and whether
adequate third party coverage will be available.
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS. ANY CLAIMS RELATING TO
IMPROPER HANDLING, STORAGE OR DISPOSAL OF THESE MATERIALS COULD BE TIME
CONSUMING AND COSTLY.
Our research and development processes involve the controlled storage,
use and disposal of hazardous materials, biological hazardous materials and
radioactive compounds. We are subject to federal, state and local regulations
governing the use, manufacture, storage, handling and disposal of materials and
waste products. Although we believe that our safety procedures for handling and
disposing of these hazardous materials comply with the standards prescribed by
law and regulation, the risk of accidental contamination or injury from
hazardous materials cannot be completely eliminated. In the event of an
accident, we could be held liable for any damages that result, and any liability
could exceed the limits or fall outside the coverage of our insurance. We may
not be able to maintain insurance on acceptable terms, or at all. We could be
required to incur significant costs to comply with current or future
environmental laws and regulations.
WE MAY HAVE SIGNIFICANT PRODUCT LIABILITY EXPOSURE.
We face an inherent business risk of exposure to product liability and
other claims in the event that our technologies or products are alleged to have
caused harm. These risks are inherent in the development of chemical and
pharmaceutical products. Although we currently maintain product liability
insurance, we may not have sufficient insurance coverage and we may not be able
to obtain sufficient coverage at a reasonable cost. Our inability to obtain
product liability insurance at an acceptable cost or to otherwise protect
against potential product liability claims could prevent or inhibit the
commercialization of
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any products developed by us or our collaborators. We also have liability for
products manufactured by us on a contract basis for third parties. If we are
sued for any injury caused by our technology or products, our liability could
exceed our total assets.
OUR STOCK PRICE COULD CONTINUE TO BE HIGHLY VOLATILE AND YOU MAY NOT BE
ABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID FOR THEM.
The market price of our common stock, like that of many other life
sciences companies, has been highly volatile and is likely to continue to be
highly volatile. The following factors, among others, could have a significant
impact on the market price of our common stock:
- the results of our preclinical studies and clinical trials or
those of our collaborators or competitors or for DNA
therapeutics in general,
- evidence of the safety or efficacy of our potential products
or the products of our competitors,
- the announcement by us or our competitors of technological
innovations or new products,
- governmental regulatory actions,
- changes or announcements in reimbursement policies,
- developments with our collaborators,
- developments concerning our patent or other proprietary rights
or those of our competitors, including litigation,
- concern as to the safety of our potential products,
- period-to-period fluctuations in our operating results,
- market conditions for life science stocks in general, and
- changes in estimates of our performance by securities
analysts.
OUR ANTI-TAKEOVER PROVISIONS COULD DISCOURAGE POTENTIAL TAKEOVER
ATTEMPTS AND MAKE ATTEMPTS BY STOCKHOLDERS TO CHANGE MANAGEMENT MORE
DIFFICULT.
The approval of two-thirds of our voting stock is required to approve
some transactions and to take some stockholder actions, including the calling of
a special meeting of stockholders and the amendment of any of the anti-takeover
provisions contained in our certificate of incorporation. Further, pursuant to
the terms of our stockholder rights plan adopted in March 1995, we have
distributed a dividend of one right for each outstanding share of common stock.
These rights will cause substantial dilution to the ownership of a person or
group that attempts to acquire us on terms not approved by our Board of
Directors and may have the effect of deterring hostile takeover attempts.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On May 18, 2000, the Company held its Annual Meeting of Stockholders. The
following actions were taken at the annual meeting.
(b) The following Class II directors were elected:
(i) R. Gordon Douglas--17,352,579 shares voted in favor of the nominee,
61,754 withheld their vote.
(ii) M. Blake Ingle--17,346,029 shares voted in favor of the nominee,
68,304 withheld their vote.
The Company's Class I director, Philip M. Young, continues in office until 2001.
The Company's Class III directors, Patrick F. Latterell, Gary A. Lyons and
Dale A. Smith, continue in office until 2002.
(c) The selection of the Company's independent auditors was ratified. Shares
voted in favor of the proposal were 17,384,642, with 17,387 shares voted against
the proposal and 12,304 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
</TABLE>
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VICAL INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed in its behalf by
the undersigned thereunto duly authorized.
Vical Incorporated
Date: August 11, 2000 By: /s/ MARTHA J. DEMSKI
----------------------
Martha J. Demski
Vice President and Chief Financial Officer
(on behalf of the registrant and as the
registrant's Principal Financial and
Accounting Officer)
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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1. Exhibit 27 Financial Data Schedule
</TABLE>
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