OK VICL news junkies, here's a morsel. Scott
Headline: Vical: Reports 3Q98 Results; Updating Financials & News FLow
Author: Matt Murray/S. Pandya 212-526-5689
Rating: 2
Company: VICL
Country: SEO CUS
Industry: BIOTEC
Ticker : VICL Rank(Old): 2-Outperform Rank(New): 2-Outperform
Price : $12 7/8 52wk Range: $19-7.19 Price Target (Old): $32
Today's Date : 11/03/98 Price Target (New): $24
Fiscal Year : DEC
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EPS 1997 1998 1999 2000
QTR. Actual Old New Old New Old New
1st: -0.13A -0.05A -0.05A - -E - -E - -E - -E
2nd: -0.15A -0.19A -0.19A - -E - -E - -E - -E
3rd: -0.01A - -E -0.11A - -E - -E - -E - -E
4th: -0.07A - -E - -E - -E - -E - -E - -E
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Year:$ -0.36A $ -0.48E $ -0.47E $ -0.50E $ -0.44E $ 0.24E $ 0.34E
Street Est.: $ -0.53E $ -0.51E $ -0.66E $ -0.64E $ - -E $ - -E
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Price (As of 11/02): $12 7/8 Revenue (1998): $8.1 Mil.
Return On Equity (98): N/A Proj. 5yr EPS Grth: N/A
Shares Outstanding: 15.8 Mil. Dividend Yield: N/A
Mkt Capitalization: $205.4 Mil. P/E 1998; 1999 : N/M; N/M
Current Book Value: $2.71/sh Convertible: - -Debt-
to-Capital: 2.0 % Disclosure(s): C
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* 3Q98 RESULTS: Vical reported a net loss of $1.8 million or ($0.11)/share for
3Q98 compared to a net loss of $0.2 million or ($0.01)/share for 3Q97.
* MODEL: For FY98 we are reducing our total expense projection by $2M to
$17.8M. We are also removing a 2 million share offering that we had included
for FY98. Our new EPS estimates for FY98 is now a loss of ($0.47) from a loss
of ($0.48).
* NEWS FLOW: We now believe that Vical will present updated data on its two
lead clinical candidates, Allovectin-7 & Leuvectin, at different two
scientific meetings in the coming weeks.
* RECOMMENDATION: We maintain our 2-Outperform rating but we are lowering our
12-month price target to $24 from $32. We are now using a lower P/E multiple
(25X from 35X) given increased probability of competition from Chiron (CHIR,
$22 1/16, 2).
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FINANCIAL SUMMARY:
Vical reported a net loss of $1.8 million or ($0.11)/share for 3Q98 compared
to a net loss of $0.2 million or ($0.01)/share for 3Q97. Revenues totaled
$1.7 million for 3Q98 compared to $3.5 million for the same period a year ago.
The results for 1997 include $2 million in revenue from an outlicensing
aggreement signed with Merck. Total expenses were $4.0 million this quarter
compared to $4.2 million in 3Q97. To better reflect current operating trends,
we are lowering our total expense estimate for FY98 by $2 million to $17.8
million. We are also removing a 2 million share offering that we had included
in our model for this year and now including it in our assumptions for FY99 as
a 4 million share offering. Our new EPS estimates for FY98 is now a loss of
($0.47)/share from a previous loss of ($0.48). Our loss for FY99 is
($0.44)/share from ($0.50)/share. As of September 30,1998 the company had
approximately $40.8 million in cash and marketable securities on its balance
sheet.
INVESTMENT THESIS:
Vical may represent one of the lower risk investment opportunities in the gene
therapy sector because its technology is perhaps the simplest and its clinical
development program is one of the most advanced. The company's gene therapy
products are composed of naked DNA strands that are not contained within any protective structure. While this limits their applicability, they have been
shown convincingly to transfect muscle cells and express proteins for periods
of up to several months. Another simplification of Vical's approach to gene
therapy comes from the way in which it treats disease. The proteins that are
expressed by Vical's gene products act to stimulate an immune response, rather
than replace a defective gene. This therapeutic modality has shown promising
results by a large number of research groups, and circumvents one of the
limitations of gene therapy of not being able to produce large amounts of
protein for sustained periods of time. The Phase II clinical trials being
conducted on the company's lead products could produce some of the first
statistically significant gene therapy efficacy data. Vical also has several
strong corporate collaborations that serve to both validate its technology as
well as provide a potential source of long-term capital. Vical has formed
collaborations with five different pharmaceutical and biotech companies in
deals that could be worth up to $144 million. These collaborations include
deals with Merck worth $63 million and a $60 million deal with Pasteur Merieux
Connaught for the development of DNA vaccines.
NEWS FLOW
We have removed an initiation of another Phase I vaccine trial with partner
Pasteur Merieux Connaught from our list, as we now believe that the starting
of any additional clinical trials by Vical's corporate partner is not likely
to occur until further trials are completed with the malaria vaccine. Recall
that initial data on this Phase I trial was announced in 1Q98. Recently a
scientific paper was published that gave full details on this Phase I trial.
We now believe that the following table summaries news flow items that might
impact the share price of Vical over the coming 12-month period:
11/11-13 Updated Phase II data for Allovectin-7 in head and neck cancer at
the XVI Chemotherapy Foundation Symposium in New York.
11/19-21 Updated results for Allovectin-7 in melanoma & Leuvectin in
prostate cancer at Gene Therapy of Cancer meeting in San Diego.
4Q98 Initiation of a Phase I trial - vaccine (Merck).
4Q98 Additional corporate collaboration(s).
2H99 Phase II Alovectin-7 data from refractory, non-invasive melanoma patients |
