Vical: Bulls Vs. Bears

| About: Vical Incorporated (VICL)
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As I noted in my article earlier this week, Vical Incorporated's (NASDAQ:VICL) stock has been on a tear, with the stock, which hovered around $2.80 in June climbing higher than $4.40 in recent days. A recent, somewhat bearish article on Seeking Alpha that either overlooked or ignored the time element in Vical's Phase III primary endpoint, combined with an overall negative market in the last several days, dropped the stock to under $4.20 today before it closed at $4.34. (See the Technical Analysis below.) So, what's the story from the fundamental side of things, the potential for a market correction notwithstanding?

The bearish argument focused on criticism of the Allovectin Phase II study. It is instructive to note, however, that left out of the discourse were two key elements.

First, the study was meant only to help the company explore higher dosing levels than those evaluated in prior studies. Put another way, the Phase II study was not intended to demonstrate efficacy. That it did, and with the results noted (e.g., an inability to determine a median overall survival for the responders even after 80 months is remarkable).

Second, the trial was conducted under strict adherence to the Response Evaluation Criteria in Solid Tumors (RECIST) criteria imposed by the FDA at that time on such oncological studies. As I have pointed out earlier, these were designed for chemotherapies, not immunotherapies such as Allovectin. One particular limitation here is that if a patient receiving the treatment develops a new lesion, however small it may be, that patient must leave the trial, even if the patient is benefitting from the therapy.

So, what did we learn from the trial? (This slide and the next two are from a presentation Correlation of Response and Survival in Allovectin Melanoma Trials by D.D. Kharkevitch, A.H. Chu, L.G. Strause, L.R. Muenz, R.T. Kenney, A.P. Rolland (Abstract #8572, ASCO 2011, slides courtesy of Vical Incorporated. The entire poster can be found here) The conclusion, as noted, was that high-dose Allovectin appeared to be an active, well-tolerated treatment for selected Stage III/IV metastatic melanoma patients with injectable cutaneous, subcutaneous, or nodal lesions.

Even more striking are the results below, both in terms of the Kaplan-Meier curves as well as an example for a 41 year old male patient, which show how after six treatment cycles, five of six lung lesions are non-detectable by CT scan.

So, overall, the company drew the following conclusions from the work done through the Phase 2 study:

The Allovectin Phase III study was designed to accommodate all the 'lessons learned' from the studies that preceded it so as to provide an optimal venue by which to demonstrate the use of an immunotherapy - in this case, Allovectin - in the treatment of metastatic melanoma. Below is the resulting trial design. The trial design favored success with the primary (response rate) endpoint, as is seen in the slide below (courtesy of Vical Incorporated).

Importantly, note the relaxed RECIST criteria for 'progressive' disease up to Week 16. As noted, this provided physicians with the discretion needed to ignore clinically insignificant new lesions and to continue to treat patients who would otherwise have been forced to leave the study (as they were in the Phase II study.) Clearly, the work presented here demonstrates the insightful and meticulous trial design that was systematically negotiated with the FDA through the Special Protocol Assessment process.

As well, the trial design placed high importance on measuring the response rate at ≥ 24 weeks for immunotherapy versus the typical "best response" measurement for chemotherapy:

In conclusion, I would assert a company that put this much effort into designing this trial and diligently conducting it over a period now approaching six years probably has earned some degree of trust, including when best to stop the trial and look at the results, if that becomes necessary. (Recall, again, the median overall survival time for the responders of the Phase II trial had not been reached even after 80 months into the study (see the K-M curve in the abstract slide above).

Technical Analysis

The Daily chart, courtesy, shows the stock correcting Wednesday together with other issues in the volatile biotech sector. The issue eased off its oversold condition, with the MACD beginning to show signs of turning over as profit-taking by the Smart Money set in.

There were no changes in the Weekly data from my earlier report except for the higher weekly price noted.

Disclosure: I am long VICL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long VICL and will not alter my position within 48 hours of the time of publication of this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research. Investing includes risks, including loss of principal.