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Vical Cuts Jobs, Shifts Focus

Vical Incorporated (VICL) recently announced a restructuring plan which includes job cuts to preserve capital. 47 positions (around 39% of the total work force) will be cut bringing the total workforce to around 74. The company is now shifting its focus from its investigational cancer immunotherapy, Allovectin, to infectious disease vaccine programs.

We remind investors that Vical had suffered a major setback earlier this month when Allovectin failed to meet its primary endpoint in a phase III study. Top-line results from the phase III trial showed that Allovectin failed to achieve a statistically significant improvement in objective response rate (primary endpoint) and overall survival (secondary endpoint) versus first line chemotherapy. The study was conducted in metastatic melanoma patients.

Given the disappointing results, Vical had terminated its development program on Allovectin and announced the strategic focus shift. Shares were down 57.26% on the trial failure news.

We note that in Jun 2013, Vical and partner Astellas Pharma, Inc. (ALPMY) commenced a multinational phase III registration study on TransVax to control cytomegalovirus (:CMV) in hematopoietic cell transplant (:HCT) recipients.

Vical and Astellas intend to commence a phase II study of TransVax in solid organ transplant (:SOT) recipients in the later half of 2013.

TransVax has orphan drug designation in the US and Europe for HCT and SOT patients.

Vical currently carries a Zacks Rank #3 (Hold). At present, companies like Gilead Sciences Inc. (GILD) and Jazz Pharmaceuticals Public Limited Company (JAZZ) look well positioned with a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.

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