Vical Collapses on Allovectin News

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Vical's quiet period ended today with loud wailing from its shareholders. Just 10 days ago, the company announced its second-quarter results. At the time, Vical said it would limit interaction with the media and others until phase 3 results for melanoma cancer vaccine Allovectin were announced later in August. Those clinical results are now known -- and the news is about as bad as it can get. Shares plunged 60% in early trading.

What happened
The bottom line is that Allovectin failed miserably. The vaccine didn't meet the study's primary endpoint of response rate at 24 weeks. Neither did it meet the secondary endpoint of overall survival. After the huge disappointment with these results, Vical's CEO Vijay Samant said the company is terminating the Allovectin program.

Hopes ran high following positive results for Allovectin in earlier clinical trials. Back in 2011, Vical presented data that showed a strong correlation of increased survival for patients responding to Allovectin compared to non-responders. Allovectin also demonstrated a solid safety profile across all of the previous studies.

Vical didn't indicate any safety concerns identified in the phase 3 study. The problem was that the vaccine just didn't work well enough to keep the program going.

Ripple effect
Vical's bad news probably translates to good news for Bristol-Myers Squibb . Yervoy, Bristol's melanoma drug, experienced tremendous success during its first full year on the market in 2012. The drug has continued to show strong sales growth this year as well.

Had Allovectin's phase 3 results been better, it could have stolen at least some of Yervoy's thunder. The safety profile and convenience of administration via a regular syringe would probably have appealed to many physicians and patients. Yervoy has some serious side effects and must be administered through intravenous infusion. Now, though, those comparative advantages for Allovectin are moot.

Allovectin could have also made life more difficult for GlaxoSmithKline. Glaxo received U.S. regulatory approval recently for two melanoma drugs -- Tafinlar and Mekinist. Like Yervoy, these two drugs have serious side effects that could make some patients wary of taking them.

The failure of Allovectin should drive up interest in Amgen's announcement about survival data for talimogene laherparepvec later this year. Amgen reported good response rates from its phase 3 study of the melanoma vaccine earlier this year. If all goes well, T-Vec (the drug's more easily pronounced abbreviation) could hit peak annual sales of $500 million.

End of the game?
Vical's self-imposed quiet game is now over. But is the game itself over for this small pharmaceutical company? Not necessarily.

A phase 3 study is under way with Astellas Pharma for ASP0113, a therapeutic vaccine designed to control cytomegalovirus, or CMV, in hematopoietic cell transplant recipients. The drug will also be part of a phase 2 study targeting solid organ transplant recipients later this year.

There are also several opportunities for Vical's therapeutic vaccine Vaxfectin. Bristol licensed Vaxfectin for the production of antibodies in its development program. Privately held Cyvax is using Vaxfectin with its malaria vaccines. Vical plans a phase 1/2 study of Vaxfectin as a vaccine for herpes simplex virus type 2, or HSV2, for later this year.

As of the end of the second quarter, Vical had $70 million in cash and cash equivalents. That's enough to keep it going for now. The partnership with Astellas and licensing agreements with other companies help some, too.

While it's the end of the game for Allovectin, I don't think we've heard the last from Vical. But a 60% drop in one day leaves many investors wishing the company's quiet game had not ended this loudly. 

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