Form PREM14A VICAL INC For: Jul 02

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  ☒                              Filed by a Party other than the Registrant  ☐

Check the appropriate box:

VICAL INCORPORATED

(Exact name of Registrant as specified in its charter)

Payment of Filing Fee (Check the appropriate box):

To the Stockholders of Vical Incorporated:

You are cordially invited to attend a special meeting of the stockholders of Vical Incorporated, a Delaware corporation, which we refer to as “we”, “Vical”, or the “company”, which will be held at 8:00 a.m., local time, on [●], 2019, at Cooley LLP, 4401 Eastgate Mall, San Diego, California 92121, unless postponed or adjourned to a later date. This is an important meeting that affects your investment in Vical.

On June 2, 2019, Vical and Brickell Biotech, Inc. (“Brickell”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which Victory Subsidiary, Inc., a wholly owned subsidiary of Vical, will merge with and into Brickell, with Brickell surviving as a wholly owned subsidiary of Vical, and Vical common stock will be issued to the former Brickell securityholders at the effective time of such merger (the “Merger”). The Merger has been unanimously approved by the boards of directors of both companies and is expected to close in the third quarter of 2019, subject to the requisite approval of Vical’s stockholders as well as the satisfaction of other conditions.

Shares of Vical common stock are currently listed on the Nasdaq Capital Market under the symbol “VICL.” Prior to consummation of the Merger, Brickell intends to file an initial listing application with the Nasdaq Capital Market. After completion of the Merger, Vical will be renamed “Brickell Biotech, Inc.” and expects to trade on the Nasdaq Capital Market under the symbol “BBI.” References herein to the combined company are references to Vical following the Merger transaction.

Concurrent with the execution of the Merger Agreement, Brickell entered into a Funding Agreement (the “Funding Agreement”) with NovaQuest Co-Investment Fund X, L.P. (“NovaQuest”) pursuant to which NovaQuest committed to provide up to $25.0 million in near-term research and development funding to Brickell following the closing of the Merger (the “Concurrent Financing”), with $5.6 million of the commitment expected to be paid promptly following the closing of the Merger and the remaining portion of the commitment expected to be paid in quarterly payments equal to 67% of invoiced research and development expenses incurred during the subsequent four fiscal quarters.

In connection with the Concurrent Financing, immediately following the closing of the Merger, the combined company will issue warrants to NovaQuest (the “NovaQuest Warrants”) to purchase shares of Vical common stock. The number of shares of Vical common stock underlying the NovaQuest Warrants will be based on 10% warrant coverage on the $25.0 million NovaQuest funding commitment and the final exchange ratio for the Merger (the “Exchange Ratio”), and the exercise price of the NovaQuest Warrants will be determined based on a 10% premium to the Brickell price per share of common stock implied value in the Merger, as adjusted for the Exchange Ratio.

Immediately following the Merger, the former Brickell securityholders and NovaQuest, collectively, are expected to own, subject to adjustment, approximately 60% of the aggregate number of shares of Vical common stock, and the securityholders of Vical immediately prior to the Merger are expected to own, subject to adjustment, approximately 40% of the aggregate number of shares of Vical common stock (in each case on a fully diluted basis using the treasury stock method in instances other than with respect to the NovaQuest Warrants and certain equity issuances by Brickell following the signing of the Merger Agreement and prior to the completion of the Merger).

Immediately after the effective time of the Merger, the combined company will appoint Robert Brown as its Chief Executive Officer, Andy Sklawer as its Co-Founder, Chief Operating Officer and Secretary, Deepak Chadha as its Chief R&D Officer, R. Michael Carruthers as its Chief Financial Officer, and David McAvoy as its General Counsel. In addition, each of Dr. R. Gordon Douglas, Richard Beleson, Robert Merton, George Morrow and Thomas Shenk will resign from Vical’s board of directors effective upon the effective time of the Merger, and the designees of Brickell pursuant to the Merger Agreement, Robert Brown, Reginald Hardy, George Abercrombie, Dr. William Ju and Dennison Veru, will be appointed to fill the vacancies created by the resignations of the current Vical directors listed above. The Vical designees who will remain on the board of directors are Vijay Samant and Gary Lyons.

Vical is holding a special meeting of stockholders (the “Special Meeting”) for the following purposes, as more fully described in the accompanying proxy statement:

After careful consideration, Vical’s board of directors has determined that the Contemplated Transactions set forth in and contemplated by the Merger Agreement are fair to, advisable and in the best interests of Vical and its stockholders and approved and declared advisable the Contemplated Transactions and has determined to recommend that the Vical stockholders vote to approve each of the proposals set forth in this proxy statement. Accordingly, Vical’s board of directors unanimously recommends that the Vical stockholders vote FOR each of the Proposal Nos. 1 and 2 described above; and FOR the authorization to adjourn the Special Meeting in order to permit the solicitation of additional proxies if there are not sufficient votes to approve Proposal Nos. 1 and 2 described above at the time of the Special Meeting.

Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the Special Meeting in person, please complete, date, sign and promptly return the accompanying proxy card in the enclosed postage paid envelope to ensure that your shares will be represented and voted at the Special Meeting.

More information about Vical, Brickell and the proposed transactions is contained in this proxy statement. Vical urges you to read the accompanying proxy statement carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 25.

Vical is excited about the opportunities the Merger brings to its stockholders, and thanks you for your consideration and continued support.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Merger described in this proxy statement or the Vical common stock to be issued in connection with the Merger or issuable in respect of Brickell options, Brickell warrants and the NovaQuest Warrants or passed upon the adequacy or accuracy of this proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated [●], 2019, and is first being mailed to Vical stockholders on [●], 2019.

PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION

VICAL INCORPORATED

10390 Pacific Center Court

San Diego, California, 92121

(858) 646-1100

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●], 2019

Dear Stockholders of Vical Incorporated:

You are cordially invited to attend the Special Meeting (the “Special Meeting”) of the stockholders of Vical Incorporated (“Vical”) to be held at 8:00 a.m., local time, on [●], 2019, at Cooley LLP, 4401 Eastgate Mall, San Diego, California 92121, for the following purposes:

The board of directors of Vical has fixed July 2, 2019 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting and any adjournment or postponement thereof. Only holders of record of shares of Vical common stock at the close of business on the record date are entitled to notice of, and to vote at, the Special Meeting. At the close of business on the record date, Vical had 22,841,278 shares of common stock outstanding and entitled to vote.

Your vote is important. Approval of Proposal No. 1 requires the affirmative vote of the holders of a majority of the outstanding shares of Vical’s common stock outstanding as of the record date for the Special Meeting. Approval of Proposal No. 2 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Special Meeting. Approval of Proposal No. 3 requires the affirmative vote of a majority of the votes present in person or by proxy at the Special Meeting and entitled to vote. We encourage you to read this proxy statement carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Alliance Advisors, LLC, at 1-844-670-2134.

Even if you plan to attend the Special Meeting in person, Vical requests that you sign and return the enclosed proxy card or grant your proxy by telephone or through the Internet to ensure that your shares will be represented at the Special Meeting if you are unable to attend.

THE VICAL BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS FAIR TO AND ADVISABLE, AND IN THE BEST INTERESTS OF, VICAL AND ITS STOCKHOLDERS AND HAS APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT AND THE CONTEMPLATED TRANSACTIONS. THE VICAL BOARD OF DIRECTORS RECOMMENDS THAT VICAL STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Vical that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission website (www.sec.gov) or upon your written or oral request by contacting Vical Incorporated, Investor Relations, 10390 Pacific Center Court, San Diego, California 92121-4340, or by calling (858) 646-1100.

You may also request information from Alliance Advisors, LLC, Vical’s proxy solicitor, at the following address and telephone number:

Alliance Advisors, LLC

200 Broadacres Drive, 3rd Floor

Bloomfield, NJ 07003

Toll Free: 1-844-670-2134

For additional details about where you can find information about Vical, please see the section titled “Where You Can Find More Information” in this proxy statement.

ABOUT THIS DOCUMENT

Vical Incorporated, which we refer to herein as the “company,” “Vical,” “we,” “our,” or “us,” or, following the consummation of the Merger, the “combined company,” is providing these proxy materials in connection with the solicitation by our board of directors of proxies to be voted at our Special Meeting of our stockholders to be held on [●], 2019, commencing at 8:00 a.m., local time, at Cooley LLP, 4401 Eastgate Mall, San Diego, California 92121, or at any adjournment or postponement thereof. This proxy statement and the enclosed proxy card will be mailed to each stockholder entitled to notice of, and to vote at, the Special Meeting of stockholders commencing on [●], 2019.

You are cautioned not to rely on any information other than the information contained in or incorporated by reference into this proxy statement. No one has been authorized to provide you with information that is different from that contained in or incorporated by reference into this proxy statement. This proxy statement is dated [●], 2019. You should not assume that the information contained in this proxy statement is accurate as of any other date, nor should you assume that the information incorporated by reference into this proxy statement is accurate as of any date other than the date of such incorporated document. The mailing of this proxy statement to our stockholders will not create any implication to the contrary.

Except where specifically noted, the following information and all other information contained in this proxy statement does not give effect to a Reverse Split described in Proposal No. 1, beginning on page 120 of this proxy statement.

This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

TABLE OF CONTENTS

i.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following section provides answers to frequently asked questions about the Merger and other matters relating to the Special Meeting. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections. Vical urges its stockholders to read this document in its entirety prior to making any decision.

What is the Merger?

Vical Incorporated (“Vical”), Victory Subsidiary, Inc., a wholly owned subsidiary of Vical (“Merger Sub”), and Brickell Biotech, Inc. (“Brickell”) have entered into an Agreement and Plan of Merger and Reorganization, dated as of June 2, 2019 (the “Merger Agreement”). The Merger Agreement contains the terms and conditions of the proposed merger of Vical and Brickell. Under the Merger Agreement, Merger Sub will merge with and into Brickell, with Brickell surviving as a wholly owned subsidiary of Vical (the “Merger”).

Concurrent with the execution of the Merger Agreement, Brickell entered into a Funding Agreement (the “Funding Agreement”) with NovaQuest Co-Investment Fund X, L.P. (“NovaQuest”) pursuant to which NovaQuest committed to provide up to $25.0 million in near-term research and development funding to Brickell in connection with Brickell’s sofpironium bromide product candidate following the closing of the Merger, subject to the terms and conditions of the Funding Agreement (the “Concurrent Financing”), with $5.6 million of the commitment expected to be paid promptly following the closing of the Merger and the remaining portion of the commitment expected to be paid in quarterly payments equal to 67% of invoiced research and development expenses incurred during the subsequent four fiscal quarters in connection with Brickell’s sofpironium bromide product candidate.

At the effective time of the Merger, each share of Brickell capital stock outstanding immediately prior to the effective time (excluding any (i) properly dissenting shares of Brickell common stock or (ii) shares of Brickell common stock held as treasury stock or held or owned by Brickell or Merger Sub, which will be canceled without consideration) will be automatically converted solely into the right to receive a number of shares of Vical common stock calculated using an exchange ratio formula described in the Merger Agreement (the “Exchange Ratio”). The Exchange Ratio is intended to allocate to the former Brickell securityholders and NovaQuest, collectively, approximately 60% of the aggregate number of shares of Vical common stock, and to the securityholders of Vical immediately prior to the Merger, approximately 40% of the aggregate number of shares of Vical common stock (in each case on a fully diluted basis using the treasury stock method in instances other than with respect to the NovaQuest Warrants and certain equity issuances by Brickell following the signing of the Merger Agreement and prior to the completion of the Merger). The Exchange Ratio is based on a $60.0 million valuation of Brickell and a $40.0 million valuation of Vical and is subject to adjustment based on the Vical Net Cash and Brickell Net Working Capital (each as defined in the section titled “The Merger Agreement—Conditions to the Completion of the Merger”) balances prior to the completion of the Merger.

After the completion of the Merger, Vical will change its corporate name to “Brickell Biotech, Inc.” References to the combined company in this proxy statement are references to Vical following the Merger transaction. For a more complete description of the Merger and Exchange Ratio, please see the section titled “The Merger Agreement” in this proxy statement.

What am I voting on?

There are three matters scheduled for a vote at the Special Meeting:

1.

What will happen to Vical if, for any reason, the Merger does not close?

If, for any reason, the Merger does not close, the Vical board of directors may, following the termination of the Merger Agreement, elect to, among other things, divest all or a portion of Vical’s business, or take the steps necessary to liquidate all of Vical’s business and assets. If Vical decides to dissolve and liquidate its assets, Vical would be required to pay all of its contractual obligations, and to set aside certain reserves for potential future claims, and there can be no assurance as to the amount or the timing of such a liquidation and distribution of available cash left to distribute to stockholders after paying the obligations of Vical and setting aside funds for reserves.

Why are the two companies proposing to merge?

Vical and Brickell believe that the Merger will result in a combined company that will engage in the development and potential commercialization of dermatological therapeutics, in addition to potential monetization of Vical’s VL-2397 program in the future.

Vical’s board of directors considered a number of factors that supported its decision to approve the Merger Agreement. In the course of its deliberations, Vical’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement.

For a discussion of Vical’s reasons for the Merger, please see the section titled “The Merger—Reasons for the Merger.”

Why am I receiving these materials?

You are receiving these proxy materials because you have been identified as a stockholder of Vical as of the record date, and you are entitled to vote at the Special Meeting to approve the matters described in this proxy statement. This proxy statement contains important information about the proposed Merger, Concurrent Financing, Reverse Split and the Special Meeting and you should read it carefully and in its entirety. The enclosed voting materials allow you to authorize a proxy to vote your shares of Vical common stock without attending the Special Meeting. As promptly as practicable, please complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or call the toll-free telephone number listed on your proxy card or access the Internet website described in the instructions on the enclosed proxy card.

Who can vote at the Annual Meeting?

Only stockholders of record at the close of business on July 2, 2019, will be entitled to vote at the Annual Meeting. On the record date, there were 22,841,278 shares of Vical common stock outstanding and entitled to vote.

Am I a stockholder of record?

If at the close of business on July 2, 2019, your shares were registered directly in your name with Vical’s transfer agent, Computershare, then you are a stockholder of record.

2.

What is required to consummate the Merger?

To consummate the Merger, Proposal Nos. 1 and 2 must be approved at the Special Meeting, or at any permitted adjournment thereof, by the requisite holders of Vical common stock on the record date for the Special Meeting.

In addition to the requirement of obtaining such stockholder approval, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.

For a more complete description of the closing conditions under the Merger Agreement, we urge you to read the section titled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement.

Are there any federal or state regulatory requirements that must be complied with or federal or state regulatory approvals or clearances that must be obtained in connection with the Merger?

Neither Vical nor Brickell is required to make any filings or obtain any approvals or clearances from any antitrust regulatory authorities in the United States or other countries to consummate the Merger. In the United States, Vical must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the Contemplated Transactions, and the filing with the SEC of this proxy statement. Prior to consummation of the Merger, Vical intends to file an initial listing application with Nasdaq.

What will the holders of Brickell capital stock, warrants, options and convertible notes receive in the Merger?

As a result of the Merger, Brickell stockholders will become entitled to receive shares of Vical common stock in exchange for shares of Brickell capital stock in an amount to be calculated by the application of the Exchange Ratio. Each option to purchase shares of Brickell common stock that is outstanding and unexercised immediately prior to the effective time of the Merger, whether or not vested, will be converted into an option to purchase shares of Vical common stock, based on the Exchange Ratio. Each Brickell warrant that is outstanding immediately prior to the effective time of the Merger will be assumed by Vical and converted into a warrant to purchase Vical common stock, and Vical will assume each such Brickell warrant in accordance with its terms. Brickell convertible notes will convert into capital stock prior to the consummation of the Merger and holders of convertible notes will be treated like holders of capital stock following conversion. For a more complete description of what holders of Brickell capital stock, warrants, options and convertible notes will receive in the Merger, please see the sections titled “Market Price and Dividend Information” and “The Merger Agreement—Merger Consideration” in this proxy statement.

Will holders of the Vical common shares issued in the Merger and in connection with the NovaQuest Warrants be able to sell those shares without restriction?

The shares of Vical common stock issued as consideration in the Merger and in connection with the NovaQuest Warrants will be issued in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder and may not be offered or sold by the holders of those shares absent registration or an applicable exemption from registration requirements. As a general matter, holders of such shares will not be able to transfer any of their shares until at least six months after receiving shares of Vical common stock, which is when the shares would first be eligible to be sold under Rule 144 promulgated under the Securities Act, assuming the conditions thereof are otherwise satisfied.

Certain stockholders of Brickell, including each director and executive officer of Brickell, have agreed to certain transfer restrictions on the shares of common stock to be issued to them in the Merger for a period of 180 days following the effective time of the Merger. See the section titled “Agreements Related to the Merger—Lock-Up Agreements” in this proxy statement for more detail.

3.

Who will be the directors of the Combined Company following the Merger?

At and immediately after the effective time of the Merger, the board of directors of the combined company and its committees is expected to be comprised of the individuals set forth in the table below. The directors shall serve until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.

Who will be the executive officers of the Combined Company immediately following the Merger?

Immediately following the Merger, the executive management team of the combined company is expected to be comprised of the following individuals:

As a Vical stockholder, how does the Vical board of directors recommend that I vote?

After careful consideration, the Vical board of directors recommends that Vical stockholders vote:

What risks should I consider in deciding whether to vote in favor of the Reverse Split and consummation of the change of control of Vical?

You should carefully review the section of this proxy statement titled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which Vical, as an independent company, is subject and risks and uncertainties to which Brickell, as an independent company and the continuing company, is subject.

4.

When do you expect the Merger to be consummated?

We anticipate that the Merger will occur as promptly as practicable after the Special Meeting to be held [●], 2019 subject to the requisite approval of Vical’s stockholders as well as the satisfaction of other closing conditions, but we cannot predict the exact timing. For a more complete description of the closing conditions under the Merger Agreement, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement.

If effected, how will the Reverse Split affect options, restricted stock units and warrants to acquire Vical’s common stock and Vical’s stock option plans?

As of the effective time of the Reverse Split, Vical will adjust and proportionately decrease the number of shares of Vical’s common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options, restricted stock units and warrants to acquire Vical’s common stock at the Reverse Split ratio approved by our board of directors. All stock options, restricted stock units and warrants to acquire shares of Vical’s common stock that are outstanding immediately prior to the effective time of the Merger will remain outstanding following the effective time of the Merger. In addition, as of the effective time of the Reverse Split, Vical will adjust and proportionately decrease the total number of shares of Vical’s common stock that may be the subject of future grants under Vical’s stock plans at the selected Reverse Split ratio.

What do I need to do now?

Vical urges you to read this proxy statement carefully, including its Appendices, and to consider how the Merger affects you.

If you are a stockholder of record of Vical, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may also provide your proxy instructions via telephone or the Internet by following the instructions on your proxy card or instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Special Meeting of Vical stockholders. The laws of the State of Delaware, under which Vical is incorporated, permit electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of elections can determine that the proxy was authorized by the stockholder.

The telephone and Internet voting procedures below are designed to authenticate stockholders’ identities, to allow stockholders to grant a proxy to vote their shares and to confirm that stockholders’ instructions have been recorded properly.

Whether you hold your shares directly as the stockholder of record or beneficially in “street name”, you may vote your shares by proxy without attending the Special Meeting. Depending on how you hold your shares, you may vote your shares in one of the following ways:

Shareholders of Record: For Shares Registered in Your Name

The procedures for voting by proxy are as follows:

5.

If you vote by proxy, your vote must be received by 11:59 p.m. Eastern Time on [●], 2019, to be counted.

We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

Even if you plan to attend the Special Meeting in person, we recommend that you also submit your proxy card or voting instructions or vote by telephone or via the Internet by the applicable deadline so that your vote will be counted if you later cannot attend the Special Meeting.

Beneficial Shareholders: For Shares Registered in the Name of a Broker or Bank

If your Vical shares are held by your broker as your nominee, that is, in “street name,” the enclosed voting instruction card is sent by the institution that holds your shares. Please follow the instructions included on that proxy card regarding how to instruct your broker to vote your Vical shares. If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the NYSE deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation (including any advisory stockholder votes on executive compensation and on the frequency of stockholder votes on executive compensation), and certain corporate governance proposals, even if management-supported. Proposal No. 2 (approval of the consummation of a change of control of Vical resulting from the Contemplated Transactions pursuant to the Nasdaq rules) is a non-routine matter, and accordingly your broker or nominee may not vote your shares on such proposals without your instructions. Proposal No. 1 (approval of the Reverse Split) and Proposal No. 3 (approval of the adjournment of the Special Meeting, if necessary) are considered routine matters and accordingly your broker or nominee may vote your shares on such proposals in the absence of your instructions.

Who can vote at the Special Meeting?

If, on the record date, your shares of Vical common stock are registered directly in your name with the Vical transfer agent, you are considered to be the stockholder of record with respect to those shares, and the proxy materials and proxy card are being sent directly to you by Vical. If you are a Vical stockholder of record, you may attend the Special Meeting of Vical stockholders and vote your shares in person. Even if you plan to attend the Special Meeting in person, Vical requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Special Meeting if you are unable to attend.

If, on the record date, your shares of Vical common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Special Meeting of Vical stockholders. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

6.

How are votes counted?

Votes will be counted by the inspector of elections appointed for the meeting, who will separately count votes “For” and “Against,” abstentions and, if applicable, broker non-votes.

What are “broker non-votes”?

As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.”

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding a majority of the issued and outstanding shares entitled to vote at a meeting are present at such meeting in person or represented by proxy. On the record date, there were 22,841,278 shares of Vical common stock outstanding and entitled to vote. Thus, the holders of [●] shares of Vical common stock must be present in person or represented by proxy at the Special Meeting to have a quorum.

Your shares will be counted towards the quorum if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Special Meeting. Abstentions and broker non-votes, if applicable, will also be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares at the meeting in person or represented by proxy may adjourn the meeting to another date.

How many votes are needed to approve each proposal?

Approval of Proposal No. 1 requires the affirmative vote of the holders of a majority of the outstanding shares of Vical’s common stock outstanding as of the record date for the Special Meeting, assuming a quorum is present. Abstentions and broker non-votes will have the effect of a “NO” vote for Proposal No. 1. It is anticipated that Proposal No. 1 will be a discretionary proposal considered routine under the rules of the NYSE.

Approval of Proposal No. 2 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Special Meeting, assuming a quorum is present. Abstentions and broker non-votes will be not be considered votes cast and will have no effect on the vote for Proposal No. 2. It is anticipated that Proposal No. 2 will be a non-discretionary proposal considered non-routine under the rules of the NYSE.

Approval of Proposal No. 3 requires the affirmative vote of a majority of the votes present in person or by proxy at the Special Meeting and entitled to vote. Abstentions and broker non-votes will be considered votes cast and have the effect of a “NO” vote for Proposal No. 3. It is anticipated that Proposal No. 3 will be a discretionary proposal considered routine under the rules of the NYSE.

When and where will the Special Meeting of Vical stockholders be held?

The Special Meeting of Vical stockholders will be held at 8:00 a.m., local time, on [●], 2019 at Cooley LLP, 4401 Eastgate Mall, San Diego, California 92121. Subject to space availability, all Vical stockholders as of the record date, or their duly appointed proxies, may attend the meeting.

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the approval of the amendment to Vical’s restated certificate of incorporation, as amended, to effect the Reverse Split at a ratio in the range of between 1-for-[●] to 1-for-[●], inclusive, with

7.

such ratio to be mutually agreed by Vical and Brickell and to be effected by Vical prior to the effective time of the Merger (Proposal No. 1), “For” the approval of the consummation of a change of control of Vical resulting from the Contemplated Transactions pursuant to the Nasdaq rules, as contemplated by the Merger Agreement (Proposal No. 2), and “For” the authorization to adjourn the Special Meeting to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1 and Proposal No. 2 on the date of the Special Meeting.

May I change my vote after I have submitted a proxy or provided proxy instructions?

Vical stockholders of record may change their vote at any time before their proxy is voted at the Special Meeting in one of three ways. First, a stockholder of record of Vical can send a written notice to the Corporate Secretary of Vical stating that the stockholder would like to revoke its proxy. Second, a stockholder of record of Vical can submit new proxy instructions either on a new proxy card, by the telephone or via the Internet. Third, a stockholder of record of Vical can attend the Special Meeting and vote in person. Attendance alone will not revoke a proxy. If a Vical stockholder of record or a stockholder who owns Vical shares in “street name” has instructed a broker to vote its shares of Vical common stock, the stockholder must follow directions received from its broker to change those instructions.

Your most current proxy card or telephone or Internet proxy is the one that is counted.

Should Brickell’s and Vical’s stockholders send in their stock certificates now?

No. After the Merger is consummated, Brickell’s stockholders will receive written instructions from the exchange agent for exchanging their certificates representing shares of Brickell capital stock for certificates representing shares of Vical’s common stock. Each Brickell stockholder who otherwise would be entitled to receive a fractional share of Vical common stock will be entitled to receive an amount in cash, without interest, determined by multiplying such fraction by the volume-weighted average closing trading price of a share of Vical common stock on Nasdaq for the five consecutive trading days ending five trading days immediately prior to the date upon which the Merger becomes effective.

In addition, Vical’s stockholders will receive written instructions, as applicable, from Vical’s transfer agent, Computershare, for exchanging their certificates representing shares of Vical’s common stock for new certificates giving effect to the Reverse Split, if effected. Vical’s stockholders will also receive a cash payment in lieu of any fractional shares, determined by multiplying such fraction by the fair market value per share of Vical’s common stock immediately prior to the effective time of the Reverse Split as determined by the Vical board of directors.

Am I entitled to appraisal or dissenters’ rights?

No, Vical’s stockholders are not entitled to appraisal or dissenters’ rights in connection with the Merger.

Have Brickell’s stockholders agreed to adopt the Merger Agreement?

Yes. On June 2, 2019, Brickell’s stockholders adopted and approved the Merger Agreement and approved the Contemplated Transactions.

Who is paying for this proxy solicitation?

Vical pays the cost of soliciting proxies. In addition to these proxy materials, Vical’s directors and employees, and Vical’s proxy solicitor, Alliance Advisors, LLC, may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. Alliance Advisors, LLC will be paid a customary fee of $10,000, plus out-of-pocket expenses if it solicits proxies, in connection with the solicitation.

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Who can help answer my questions?

If you are a Vical stockholder and would like additional copies, without charge, of this proxy statement or if you have questions about the Merger and related transactions, including the procedures for voting your shares, you should contact Alliance Advisors, LLC, Vical’s proxy solicitor, by telephone at the following address and phone number, or Vical, at the following address, phone number and email address:

Alliance Advisors, LLC

200 Broadacres Drive, 3rd Floor

Bloomfield, NJ 07003

Toll Free: 1-844-670-2134

Vical Incorporated

Investor Relations

10390 Pacific Center Court

San Diego, California, 92121-4340

Telephone: (858) 646-1100

Email: [email protected]

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MARKET PRICE AND DIVIDEND INFORMATION

Vical common stock is listed on “Nasdaq” under the symbol “VICL.” Brickell is a private company and its common stock and preferred stock are not publicly traded.

Vical common stock

The closing price of Vical common stock on May 31, 2019, the business day immediately prior to the public announcement of the Merger on June 3, 2019, as reported on “Nasdaq”, was $1.15 per share. The closing price of Vical common stock on July 2, 2019, as reported on “Nasdaq”, was $[●] per share.

Because the market price of Vical common stock is subject to fluctuation, the market value of the shares of Vical common stock that Brickell stockholders will be entitled to receive in the Merger may increase or decrease.

Assuming successful application for initial listing with “Nasdaq”, following the consummation of the Merger, Vical common stock will continue to be listed on “Nasdaq” and will trade under Vical’s new name “Brickell Biotech, Inc.” and new trading symbol “BBI.”

As of July 2, 2019, the record date for the Special Meeting, Vical had 125 holders of record of its common stock.

Dividends

Vical has never declared or paid any cash dividends on its common stock and does not anticipate paying cash dividends on its common stock for the foreseeable future. Brickell has never declared or paid any cash dividends on shares of its common stock.

Brickell anticipates that the combined company will retain all of its future earnings to advance the clinical trials for its products, and does not anticipate paying any cash dividends on shares of its common stock in the foreseeable future. Any future determination to declare cash dividends on shares of the combined company’s common stock will be made at the discretion of its board of directors, subject to applicable law and contractual restrictions and will depend on its financial condition, results of operations, capital requirements, general business conditions and other factors that its board of directors may deem relevant.

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RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement, you should carefully consider the material risks described below before deciding how to vote your shares of Vical common stock. You should also read and consider the risks associated with the business of Vical because these risks may also affect the combined company—these risks can be found in the Vical 10-K, as filed with the SEC on March 1, 2019 and incorporated by reference herein. You should also read and consider the other information in this proxy statement and the other documents incorporated by reference into this proxy statement. Please see the section titled “Where You Can Find More Information” on page 185 of this proxy statement.

Risks Related to the Merger

If the Merger with Brickell is not consummated, Vical’s business could suffer materially and Vical’s stock price could decline.

The consummation of the Merger with Brickell is subject to the satisfaction of a number of closing conditions, including the receipt of Vical stockholder approvals, Vical’s successful application for initial listing with Nasdaq, the occurrence of the Special Meeting, the satisfaction of the Vical Net Cash condition and other closing conditions. For a more detailed discussion of the Vical Net Cash condition and other closing conditions see the section titled “The Merger Agreement—Conditions to the Completion of the Merger.” Vical and Brickell are targeting a closing of the Merger in the third quarter of 2019.

If the Merger is not consummated, Vical may be subject to a number of material risks, and its business and stock price could be adversely affected, as follows:

In addition, if the Merger Agreement is terminated and Vical’s board of directors determines to seek another business combination, it may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger. Due to the lengthy nature of the strategic process, the further passage of time will diminish cash available. In such circumstances, Vical’s board of directors may elect to, among other things, divest all or a portion of Vical’s business, or take the steps necessary to liquidate all of Vical’s business and assets, and in either such case, the consideration that Vical receives may be less attractive than the consideration to be received by Vical pursuant to the Merger Agreement.

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Some of Vical’s officers and directors have conflicts of interest that may influence them to support or approve the Merger.

Officers and directors of Vical participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, to the extent applicable, their continued service as a director of the combined company, severance benefits and continued indemnification. These interests, among others, may influence the officers and directors of Vical to support or approve the Merger. For a more detailed discussion see “The Merger—Interests of the Vical Directors and Executive Officers in the Merger.”

Vical’s severance agreements with Vical’s executive officers and certain other employees require Vical to pay severance benefits to any of those persons who are terminated under specified circumstances, including in connection with a change of control of Vical, which could harm Vical’s financial condition or results.

Vical’s executive officers and certain other employees are parties to severance agreements that contain change of control and severance provisions providing for severance and other benefits and acceleration of vesting of stock options in the event of a termination of employment under specified circumstances. Based on the terms of their respective severance agreements, Vical’s executive officers will be entitled to receive an aggregate of approximately $2.3 million in severance benefits due to the terminations of their employment upon a change of control in connection with the consummation of the Merger. The payment of these severance benefits could harm Vical’s financial condition and results and reduce the cash available to the combined company following the Merger.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.

In general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party following June 2, 2019, the date of the Merger Agreement. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would have a material adverse effect on Vical or Brickell, to the extent they resulted from the following (unless, in some cases, they have a disproportionate effect on Vical or Brickell, as the case may be):

If adverse changes occur but Vical and Brickell must still complete the Merger, the combined company’s stock price may suffer.

The market price of the combined company’s common stock may decline as a result of the Merger.

The market price of the combined company’s common stock may decline as a result of the Merger for a number of reasons, including if:

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Vical’s stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Merger, Vical’s stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and stock price following the Merger. Even if the combined company is able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

The combined company will incur significant transaction costs as a result of the Merger, including investment banking, legal and accounting fees. In addition, the combined company will incur significant consolidation and integration expenses which cannot be accurately estimated at this time. Actual transaction costs may substantially exceed estimates and may have an adverse effect on the combined company’s financial condition and operating results.

During the pendency of the Merger, Vical and Brickell will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties’ ability to enter into business combination transactions with another party.

Covenants in the Merger Agreement impede the ability of Vical or Brickell to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of Vical’s common stock, a tender offer for Vical’s common stock, a Merger or other business combination outside the ordinary course of business. Any such transactions could be favorable to such party’s stockholders.

Because the lack of a public market for Brickell’s common stock makes it difficult to evaluate the fairness of the Merger, Brickell’s stockholders may receive consideration in the Merger that is greater than or less than the fair market value of Brickell’s common stock.

The outstanding share capital of Brickell is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Brickell. It is possible that the value of Vical’s common stock to be issued in connection with the Merger will be greater than the fair market value of Brickell.

Because the Merger will result in an ownership change under Section 382 of the Internal Revenue Code (the “Code”) for Vical, Vical’s pre-merger net operating loss carryforwards and certain other tax attributes will be subject to limitations. The net operating loss carryforwards and other tax attributes of Brickell and of the combined organization may also be subject to limitations as a result of ownership changes.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code (“Section 382”), the corporation’s net operating loss carryforwards and certain other tax attributes arising before

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the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Merger will result in an ownership change for Vical and, accordingly, Vical’s net operating loss carryforwards and certain other tax attributes will be subject to limitations (or disallowance) on their use after the Merger. Brickell’s net operating loss carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on Vical’s, Brickell’s and the combined organization’s net operating loss carryforwards. Consequently, even if the combined organization achieves profitability, it may not be able to utilize a material portion of Vical’s, Brickell’s or the combined organization’s net operating loss carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

The Exchange Ratio is not adjustable based on the market price of Vical common stock so the merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

At the effective time of the Merger, outstanding shares of Brickell capital stock will be converted into shares of Vical common stock. Applying the Exchange Ratio, the former Brickell securityholders and NovaQuest, collectively, are expected to own, subject to adjustment, approximately 60% of the aggregate number of shares of Vical common stock, and the securityholders of Vical as of immediately prior to the Merger are expected to own, subject to adjustment, approximately 40% of the aggregate number of shares of Vical common stock (in each case on a fully diluted basis using the treasury stock method in instances other than with respect to the NovaQuest Warrants and certain equity issuances by Brickell following the signing of the Merger Agreement and prior to the completion of the Merger). The exchange ratio formula is based on a $60.0 million valuation of Brickell and a $40.0 million valuation of Vical and is subject to adjustment based on the Vical Net Cash and Brickell Net Working Capital balances (each as defined in the section titled “The Merger Agreement—Conditions to the Completion of the Merger”) prior to the completion of the Merger.

Any changes in the market price of Vical common stock before the completion of the Merger will not affect the number of shares Brickell stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Vical common stock declines from the market price on the date of the Merger Agreement, then Brickell securityholders could receive merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Vical common stock increases from the market price on the date of the Merger Agreement, then Brickell securityholders could receive merger consideration with substantially more value for their shares of Brickell capital stock than the parties had negotiated for in the establishment of the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Because the Exchange Ratio does not adjust as a result of changes in the value of Vical common stock, for each one percentage point that the market value of Vical common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Brickell securityholders.

The opinion received by Vical’s board of directors from MTS Securities has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.

Vical retained MTS as a financial advisor in connection with the Merger. On June 2, 2019, MTS Securities, an affiliate of MTS, delivered its opinion to the board of directors of Vical that, as of June 2, 2019, and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in such written opinion, the Exchange Ratio is fair, from a financial point of view, to the holders of Vical common stock (other than Excluded Shares (as defined in “The Merger—Opinion of MTS Securities, LLC”). The opinion addresses solely the fairness, from a financial point of view and as of the date of such opinion, of the Exchange Ratio to the holders of Vical common stock and does not address any other terms in the Merger Agreement, or any other agreement contemplated by the Merger Agreement or relating to the Merger or any

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other aspect or implication of the Merger, including, without limitation, the form or structure of the Merger or the fairness of the Merger or the Exchange Ratio to any other securityholders or creditors or any other constituency of Vical. MTS Securities did not consider any potential legislative or regulatory changes currently being considered by the SEC, or any other governmental or regulatory bodies, or any changes in accounting methods or generally accepted accounting principles that may be adopted by the SEC or the Financial Accounting Standards Board. It should be understood that, although subsequent developments may affect the conclusion reached in the opinion, MTS Securities does not have any obligation to update, revise or reaffirm such opinion and has not done so. See the section titled “The Merger—Opinion of MTS Securities, LLC” and Appendix B to this proxy statement.

Vical and Brickell may become involved in securities litigation or stockholder derivative litigation in connection with the Merger, and this could divert the attention of Vical and Brickell management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Vical and Brickell may become involved in this type of litigation in connection with the Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of Vical, Brickell and the combined company, and insurance coverage may not be sufficient to cover all related costs and damages.

If any of the events described in “Risks Related to Brickell’s Development, Commercialization and Regulatory Approval of Brickell’s Investigational Drug, Sofpironium Bromide,” “Risks Related to Brickell’s Dependence on Third Parties” “Risks Related to Brickell’s Business,” “Risks Related to Brickell’s Financial Operations” or “Risks Related to Brickell’s Intellectual Property” occur, those events could cause the potential benefits of the Merger not to be realized.

Brickell’s business is expected to constitute substantially all of the business of the combined company following the Merger. As a result, the risks described below in the sections titled “Risks Related to Brickell’s Development, Commercialization and Regulatory Approval of Brickell’s Investigational Drug, Sofpironium Bromide” beginning on page [●], “Risks Related to Brickell’s Dependence on Third Parties” beginning on page [●], “Risks Related to Brickell’s Business” beginning on page [●], “Risks Related to Brickell’s Financial Operations” beginning on page [●] and “Risks Related to Brickell’s Intellectual Property” beginning on page [●] are among the most significant risks to the combined company if the Merger is completed. To the extent any of the events in the risks described in the sections referenced in the previous sentence occur, those events could cause the potential benefits of the Merger not to be realized and the market price of the combined company’s common stock to decline.

The unaudited pro forma financial information included in this proxy statement may not be representative of the combined company’s results following the Merger.

The unaudited pro forma financial information included in this proxy statement has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the Merger and related transactions been completed as of the date indicated, nor is it indicative of the combined company’s future operating results or financial position. The pro forma financial statements have been derived from the historical financial statements of Vical and Brickell and adjustments and assumptions have been made regarding the combined company after giving effect to the Merger. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with accuracy. Moreover, the pro forma financial

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statements do not reflect all costs that are expected to be incurred by the combined company in connection with the Merger. As a result, the actual financial condition of the combined company following the Merger may not be consistent with, or evident from, these pro forma financial statements. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition following the Merger and related transactions.

Risks Related to the Proposed Reverse Split

The Reverse Split may not increase the combined company’s stock price over the long-term.

The principal purpose of the Reverse Split is to increase the per-share market price of the combined company’s common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of the combined company and the shares of the combined company common stock being issued in the Merger on Nasdaq will be approved. It cannot be assured, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of the combined company’s common stock, it cannot be assured that the Reverse Split will increase the market price of its common stock by a multiple of the reverse stock split ratio mutually agreed by Brickell and Vical, or result in any permanent or sustained increase in the market price of the combined company’s common stock, which is dependent upon many factors, including the combined company’s business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of the combined company might meet the continued listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

The Reverse Split may decrease the liquidity of the combined company’s common stock.

Although Vical’s board of directors believes that the anticipated increase in the market price of the combined company’s common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock.

The Reverse Split may lead to a decrease in the combined company’s overall market capitalization.

Should the market price of the combined company’s common stock decline after the Reverse Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the Reverse Split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same after the Reverse Split is effected, or that the Reverse Split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the Reverse Split.

Risks Related to Vical

For risks related to the business of Vical, please refer to the section titled “Item 1A. Risk Factors” set forth in the Vical 10-Q, as filed with the SEC on May 2, 2019, which report is incorporated by reference herein.

Risks Related to Vical’s Common Stock

The price of Vical’s common stock has been and may continue to be volatile.

The stock markets in general, the markets for biotechnology stocks and, in particular, the stock price of Vical’s common stock, have experienced extreme volatility. The market for Vical’s common stock is

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characterized by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats, and Vical expects that its share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future. The volatility in Vical’s stock price is attributable to a number of factors. Vical’s common stock are, compared to the shares of such larger, more established companies, infrequently and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by Vical’s stockholders may disproportionately influence the price of those shares in either direction. The price for Vical’s stock could, for example, decline precipitously in the event that a large number of shares of its common stock are sold on the market without commensurate demand. Vical’s common stock is also a speculative or “risky” investment due to the status of its drug development programs and Vical’s lack of profits to date, and uncertainty of future market acceptance for its potential products and its ability to continue as a going concern. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that has a large public float and broader stockholder base. Many of these factors are beyond Vical’s control and may decrease the market price of Vical’s common stock, regardless of Vical’s operating performance. Vical cannot make any predictions or projections as to what the prevailing market price for its common shares will be at any time, including as to whether its common stock will sustain their current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

In the past, following periods of volatility in the market price of a particular company’s securities, litigation has often been brought against that company. Any such lawsuit could consume resources and management time and attention, which could adversely affect Vical’s business.

Provisions of Delaware law and Vical’s current certificate of incorporation and bylaws may discourage another company from acquiring it and may prevent attempts by Vical’s stockholders to replace or remove Vical’s current management.

Provisions of Delaware law and Vical’s current certificate of incorporation and bylaws may discourage, delay or prevent a Merger or acquisition that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. In addition, these provisions may frustrate or prevent any attempts by Vical’s stockholders to replace or remove Vical’s current management by making it more difficult for stockholders to replace or remove Vical’s board of directors. These provisions include:

Although Vical believes these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with Vical’s board of directors, they would apply even if an offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by Vical’s stockholders to replace or remove Vical’s current management by making it difficult for stockholders to replace members of Vical’s board of directors, which is responsible for appointing the members of Vical’s management.

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If the holders of Brickell’s options, warrants and convertible notes exercise their rights to acquire stock of the combined company, the ownership of the stockholders of the combined company will be diluted.

As of the date of this proxy statement, Brickell has issued $5.2 million in convertible notes and related warrants at 50% coverage, to acquire [●] shares of common stock, and has 1,811,800 options issued and outstanding. In addition, upon closing of the Funding Agreement, Vical will issue warrants to NovaQuest (the “NovaQuest Warrants”) to purchase shares of Vical common stock. The number of shares of common stock underlying the NovaQuest Warrants will be based on 10% warrant coverage on the $25.0 million NovaQuest funding commitment and the Exchange Ratio, and the exercise price of the NovaQuest Warrants will be determined based on a 10% premium to the Brickell per share of common stock price implied value in the Merger, as adjusted for the Exchange Ratio. In total, Brickell intends to issue up to $12.5 million in convertible notes and related warrants at 50% coverage, to acquire [●] shares of common stock, as well as options to acquire up to 2,607,274 shares of Brickell common stock, prior to consummation of the Merger. If the holders of options, warrants (including NovaQuest) and convertible notes exercise their rights to acquire stock of the combined company, the percentage ownership of the combined company’s stockholders existing prior to the exercise of rights will be diluted.

Risks Related to Vical Management Brickell Projections

You should be aware that uncertainties are inherent in prospective financial projections of any kind, and such uncertainties increase with the passage of time. None of Brickell or Vical or any of their respective affiliates, advisors, officers, directors, or representatives has made or makes any representation or can give any assurance to any Vical stockholders, or any other person, regarding the ultimate performance of Brickell compared to the information set forth in the section titled “Certain Vical Management Unaudited Prospective Financial Information” or that any such results will be achieved.

The inclusion of the Vical management Brickell projections in this proxy statement should not be regarded as an indication that Vical, Brickell or their respective advisors or other representatives considered or consider the projections to be necessarily predictive of actual future performance or events, and the Vical management Brickell projections set forth in the section titled “Certain Vical Management Unaudited Prospective Financial Information” should not be relied upon as such.

The Vical management Brickell projections were prepared by management of Vical based, in part, on certain information furnished by Brickell. The prospective financial information was not prepared with a view toward public disclosure nor was it prepared with a view toward compliance with the guidelines established by GAAP. Neither the independent registered public accounting firm of Vical, Brickell nor any other independent accounts has audited, reviewed, compiled, examined or performed any procedures with respect to the accompanying unaudited prospective financial information for the purpose of its inclusion herein, and accordingly, neither the independent registered public accounting firm of Vical, Brickell, nor any other independent accountant expresses an opinion or provides any form of assurance with respect thereto for the purpose of this proxy statement. Due to inherent uncertainties in financial projections of any kind, stockholders are cautioned not to place undue reliance, if any, on the Vical management Brickell projections.

Vical management Brickell projections are subjective in nature and may not be realized.

The Vical management Brickell projections are inherently subjective in nature and susceptible to interpretation and, accordingly, such projections may not be achieved. The Vical management Brickell projections also reflect numerous assumptions made by management, including material assumptions regarding, among other things, timing of Phase 3 clinical trials, timing of receipt of regulatory approvals, as to which there can be no assurance, market size, commercial efforts, and numerous other matters that may not be realized and are subject to significant uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the preparing party. Accordingly, there can be no assurance that the assumptions made in preparing the Vical management Brickell projections upon which the projected financial information was

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based will be realized. There may be differences between actual and projected results, and the differences may be material. The risk that these uncertainties and contingencies could cause the assumptions to fail to be reflective of actual results is further increased by the length of time over which these assumptions apply. The failure to achieve assumptions and projections in early periods could have a compounding effect on the projections shown for the later periods. Thus, any such failure of an assumption or projection to be reflective of actual results in an early period could have a greater effect on the projected results failing to be reflective of actual events in later periods. Brickell is a clinical stage company, without an FDA-approved product, and as discussed in this proxy statement, its business is subject to numerous risks. Moreover, 15-year projections in the context of a clinical stage company are inherently unreliable given the many variables, especially in later years, that may affect results.

All of these assumptions involve variables making them difficult to predict, and some are beyond the control of Brickell and Vical. Although Vical’s management believes that there was a reasonable basis for its projections and underlying assumptions, any assumptions for near-term projected cases remain uncertain, and such uncertainty increases with the length of the projected period. The projections are forward-looking statements and are subject to risks and uncertainties. See the section titled “Cautionary Note Concerning Forward-Looking Statements” on page 59. For a discussion of the Vical management Brickell projections, please see the section titled “Certain Vical Management Unaudited Prospective Financial Information” beginning on page 77.

In developing the Vical management Brickell projections provided to the Vical board, Vical management made numerous material estimates with respect to Brickell for the years ending December 31, 2019 through 2034.

The Vical management Brickell projections prepared by Vical management were based on estimates from both discussions with, and materials provided, by Brickell for the years from 2019 to 2025, which themselves were based on numerous assumptions. Additionally, such estimates were then used by Vical to extrapolate certain prospective financial results based on Vical management’s assessment of comparable companies and industry metrics (except that the unadjusted projections in respect of sofpirinium bromide milestone and royalty payments were provided by Brickell’s management and were based on Brickell’s management’s estimates for each of the calendar years ending December 31, 2019 through 2033). Vical management did not consider ranges for various financial measures but rather considered in deriving these measures, peak sales amounts, which may reduce the utility in later years of the prospective financial results.

Risks Related to Brickell

Risks Related to Brickell’s Development, Commercialization and Regulatory Approval of Brickell’s Investigational Drug, Sofpironium Bromide

Brickell’s business depends on the successful clinical development, regulatory approval and commercialization of sofpironium bromide.

The success of Brickell’s business, including its ability to finance itself and generate revenue in the future, primarily depends on the successful development, regulatory approval and commercialization of sofpironium bromide. The clinical and commercial success of sofpironium bromide depends on a number of factors, including the following:

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If Brickell does not achieve one or more of these factors, many of which are beyond its control, in a timely manner or at all, Brickell could experience significant delays or an inability to obtain regulatory approvals or commercialize sofpironium bromide. Even if regulatory approvals are obtained, Brickell may never be able to successfully commercialize sofpironium bromide. Accordingly, Brickell cannot assure you that it will be able to generate sufficient revenue through the sale of sofpironium bromide to continue its business.

Brickell has never conducted a Phase 3 clinical trial itself and may be unable to successfully do so for sofpironium bromide.

The conduct of a Phase 3 clinical trial is a long, expensive, complicated and highly regulated process. Although Brickell’s employees have conducted successful Phase 2 and Phase 3 clinical trials in the past across many therapeutic areas while employed at other companies, Brickell as a company has not conducted a Phase 3 pivotal clinical trial, and as a result may require more time and incur greater costs than it anticipates. Brickell commenced a Phase 3 long-term safety study for sofpironium bromide gel in the third quarter of 2018 and intends to initiate Phase 3 pivotal clinical trials for the registration of sofpironium bromide gel in the second half of 2019 for the U.S. market, as more fully described in “Description of Brickell’s Business.” Failure to commence or complete, or delays in, Brickell’s planned clinical trials would prevent it from or delay Brickell in obtaining regulatory approval of and commercializing sofpironium bromide and could prevent it from or delay it in receiving development- or regulatory-based milestone payments and commercializing sofpironium bromide gel for the treatment of hyperhidrosis, which would adversely impact its financial performance, as well as put Brickell in potential breach of material contracts for the development of sofpironium bromide subjecting it to significant contract liabilities.

Clinical drug development for sofpironium bromide is very expensive, time-consuming and uncertain.

Clinical development for sofpironium bromide is very expensive, time-consuming, difficult to design and implement, and its outcome is inherently uncertain. Most product candidates that commence clinical trials are

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never approved by regulatory authorities for commercialization and of those that are approved many do not cover their costs of development. In addition, Brickell, any partner with which it currently or may in the future collaborate, the FDA, an institutional review board (“IRB”), or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate Brickell’s clinical trials at any time.

In the case of sofpironium bromide, Brickell is seeking to deliver sufficient concentrations of the active pharmaceutical ingredient (“API”) absorbed from the skin surface through the skin barrier to the targeted dermal tissue to achieve the intended therapeutic effect. The topical route of administration may involve new dosage forms, which can be difficult to develop and manufacture and may raise novel regulatory issues and result in development or review delays.

Use of patient-reported outcome assessments (“PROs”) in sofpironium bromide clinical trials may delay the development of sofpironium bromide gel or increase Brickell’s development costs.

Due to the difficulty of objectively measuring the symptoms of hyperhidrosis, which is the primary target of treatment for sofpironium bromide, PROs will have an important role in the development and regulatory approval of sofpironium bromide. PROs involve patients’ own subjective assessments of efficacy, and this subjectivity increases the uncertainty of determining and achieving clinical endpoints. Such assessments can be influenced by factors outside of Brickell’s reasonable control, and can vary widely from day to day for a particular patient, and from patient to patient and site to site within a clinical trial.

Sofpironium bromide may cause undesirable side effects or have other unexpected properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.

Unforeseen side effects from sofpironium bromide could arise either during clinical development or, if approved, after it has been marketed. Undesirable side effects caused by sofpironium bromide could cause Brickell, any partners with which Brickell may collaborate, or regulatory authorities to interrupt, extend, modify, delay or halt clinical trials and could result in a more restrictive or narrower label or the delay or denial of regulatory approval by the FDA or comparable foreign authorities.

Results of clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of sofpironium bromide for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in product liability claims. Any of these occurrences may harm Brickell’s business, financial condition, operating results and prospects.

Additionally, if Brickell or others identify undesirable side effects, or other previously unknown problems, caused by sofpironium bromide after obtaining U.S. or foreign regulatory approval, a number of potentially negative consequences could result, which could prevent Brickell or its potential partners from achieving or maintaining market acceptance of sofpironium bromide and could substantially increase the costs of commercializing sofpironium bromide.

Kaken substantially controls the development of sofpironium bromide in Japan and certain other Asian countries and may make decisions regarding product development, regulatory strategy and commercialization that may not be in Brickell’s best interests. Kaken may be unable to obtain positive approval of the drug in Asian markets.

In March 2015, Brickell entered into a license agreement with Kaken. The agreement granted Kaken an exclusive Japan license and certain rights to additional Asian countries to develop and commercialize sofpironium bromide. Under the terms of the agreement, Brickell received an up-front payment and is eligible to receive future development and sales milestones and a royalty on net sales.

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Kaken has final decision-making authority for the overall regulatory, development and commercialization strategy for sofpironium bromide, market access activities, pricing and reimbursement activities, promotion, distribution, packaging, sales and safety and pharmacovigilance in Japan and certain other Asian countries. In exercising its final decision-making authority in such territories, Kaken may make decisions regarding product development or regulatory strategy based on its determination of how best to preserve and extend regulatory approvals in these territories for sofpironium bromide, which may delay or prevent achieving regulatory approval for sofpironium bromide in Kaken’s territories, as well as in the United States and the other territories which Brickell maintains exclusive rights. Additionally, Kaken is responsible for conducting certain nonclinical and chemistry, manufacturing and controls-related activities that also will be required for FDA approval in the United States, and as a result, Brickell is reliant on Kaken to execute successfully, in a timely and efficient manner, such activities on Brickell’s behalf. To the extent Kaken experiences delays and/or difficulties in performing its development activities, this could prevent or cause substantial delays in Brickell’s ability to seek approval for sofpironium bromide gel in the United States and other territories in which Brickell maintains exclusive rights. Brickell will not receive additional milestone or other payments from Kaken if Kaken is not successful in its development activities.

If Brickell or any partners with which Brickell may collaborate are unable to achieve and maintain coverage and adequate levels of reimbursement for sofpironium bromide following regulatory approval, its commercial success may be hindered severely.

If sofpironium bromide only becomes available by prescription, successful sales by Brickell or by any partners with which Brickell may collaborate depend on the availability of coverage and adequate reimbursement from third-party payors. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. The availability of coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and private third-party payors is often critical to new product acceptance. Coverage decisions may depend on clinical and economic standards that disfavor new drug products when more established or lower-cost therapeutic alternatives are already available or subsequently become available, or may be affected by the budgets and demands on the various entities responsible for providing health insurance to patients who will use sofpironium bromide. If insurers and payors decide that hyperhidrosis itself is not a disease they are willing to extend coverage to, which could happen if they only think the treatment improves quality of life, then coverage and reimbursement for sofpironium bromide may be denied. In this case, patients would be forced to pay for sofpironium bromide out-of-pocket for cash, which they may not be willing to do. Even if Brickell obtains coverage for sofpironium bromide, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use sofpironium bromide unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of sofpironium bromide.

In addition, the market for sofpironium bromide will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies and there may be time limitations on when a new drug may even apply for formulary inclusion. Also, third-party payors may refuse to include sofpironium bromide in their formularies or otherwise restrict patient access to sofpironium bromide when a less costly generic equivalent or other treatment alternative is available in the discretion of the formulary.

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, although private third-party payors tend to follow Medicare practices, no uniform or consistent policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor as well as state to state. Consequently, the coverage determination process is often a time-consuming and costly process that must be played out across many

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jurisdictions and different entities and which will require Brickell to provide scientific, clinical and health economics support for the use of sofpironium bromide compared to current alternatives and do so to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained and in what time frame.

Further, Brickell believes that future coverage and reimbursement likely will be subject to increased restrictions both in the United States and in international markets. Third-party coverage and reimbursement for sofpironium bromide may not be available or adequate in either the United States or international markets, which could harm Brickell’s business, financial condition, operating results and prospects.

Even if sofpironium bromide obtains regulatory approval, it may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.

The commercial success of sofpironium bromide, if approved, will depend significantly on the broad adoption and use of it by physicians and patients for approved indications, and may not be commercially successful even though the drug is shown to be safe and effective. The degree and rate of physician and patient adoption of sofpironium bromide, if approved, will depend on a number of factors, including but not limited to:

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If sofpironium bromide is approved for use but fails to achieve the broad degree of physician and patient adoption necessary for commercial success, Brickell’s operating results and financial condition will be adversely affected, which may delay, prevent or limit its ability to generate revenue and continue its business.

Sofpironium bromide, if approved, will face significant competition and its failure to compete effectively may prevent it from achieving significant market penetration.

The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition, less effective patent terms, and a strong emphasis on developing newer, fast-to-market proprietary therapeutics. Numerous companies are engaged in the development, patenting, manufacturing and marketing of healthcare products competitive with those that Brickell is developing, including sofpironium bromide. Brickell faces competition from a number of sources, such as pharmaceutical companies, generic drug companies, biotechnology companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales forces, manufacturing capabilities, research and development capabilities, regulatory expertise, clinical trial expertise, intellectual property portfolios, more international reach, experience in obtaining patents and regulatory approvals for product candidates and other resources than Brickell. Some of the companies that offer competing products also have a broad range of other product offerings, large direct sales forces and long-term customer relationships with Brickell’s target physicians, which could inhibit Brickell’s market penetration efforts. In addition, sofpironium bromide, if approved, may compete with other dermatological products, including over-the-counter treatments, for a share of some patients’, or payors’, discretionary budgets and for physicians’ attention within their clinical practices.

Brickell anticipates that sofpironium bromide would compete with other therapies currently used for hyperhidrosis, including but not limited to:

To compete successfully in this market, Brickell will have to provide an attractive alternative to these existing and other new therapies. Such competition could lead to reduced market share for sofpironium bromide and contribute to downward pressure on the pricing of sofpironium bromide, which could harm Brickell’s business, financial condition, operating results and prospects. For more information about the competition Brickell faces, see “Description of Brickell’s Business—Rest of Industry.”

Due to less stringent regulatory requirements in certain foreign countries, there are many more dermatological products and procedures available for use in those international markets than are approved for use in the United States. In certain international markets, there are also fewer limitations on the claims that Brickell’s competitors can make about the effectiveness of their products and the manner in which they can market them. As a result, Brickell expects to face more competition in these markets than in the United States.

Brickell expects to face generic competition for sofpironium bromide, which could adversely affect its business, financial condition, operating results and prospects.

Upon the expiration of primary patent protection in 2031 for sofpironium bromide, and in the absence of having a pending composition of matter patent issued that would provide protection through 2040, Brickell could

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lose a significant portion of sales of sofpironium bromide in a short period of time, which would adversely affect its business, financial condition, operating results and prospects. While Brickell is seeking approval of the pending patent described in the section titled “ Management’s Discussion and Analysis of Brickell’s Financial Condition and Results of Operations,” Brickell cannot provide any assurance as to whether it will be successful in obtaining approval of the pending patent.

Brickell has in the past relied, and expects to continue to rely, on third-party CROs and other third parties to conduct and oversee its sofpironium bromide clinical trials. If these third parties do not meet Brickell’s requirements or otherwise conduct the trials as required, Brickell may not be able to satisfy its contractual obligations or obtain regulatory approval for, or commercialize, sofpironium bromide.

Brickell has in the past relied, and expects to continue to rely, on third-party CROs to conduct and oversee its sofpironium bromide clinical trials and other aspects of product development. Brickell also relies on various medical institutions, clinical investigators and contract laboratories to conduct its trials in accordance with Brickell’s clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and good clinical practice (“GCP”) requirements, which are an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic products. These CROs and other third parties play a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials. Brickell relies heavily on these parties for the execution of its clinical trials and preclinical studies, and controls only certain aspects of their activities. Brickell and its CROs and other third-party contractors are required to comply with GCP and good laboratory practice (“GLP”) requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for sofpironium bromide. Regulatory authorities enforce these GCP and GLP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If Brickell or any of these third parties fail to comply with applicable GCP and GLP requirements, or reveal noncompliance from an audit or inspection, the clinical data generated in Brickell’s clinical trials may be deemed unreliable and the FDA or other regulatory authorities may require Brickell to perform additional clinical trials before approving Brickell’s or Brickell’s partners’ marketing applications. Brickell cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any of Brickell’s clinical or preclinical trials comply with applicable GCP and GLP requirements. In addition, Brickell’s clinical trials generally must be conducted with product produced under cGMP regulations. Brickell’s failure to comply with these regulations and policies may require it to repeat clinical trials, which would delay the regulatory approval process.

If any of Brickell’s CROs or clinical trial sites terminate their involvement in one of its clinical trials for any reason, it may not be able to enter into arrangements with alternative CROs or clinical trial sites, or do so on commercially reasonable terms. In addition, if Brickell’s relationship with clinical trial sites is terminated, it may experience the loss of follow-up information on patients enrolled in its ongoing clinical trials unless Brickell is able to transfer the care of those patients to another qualified clinical trial site. In addition, principal investigators for Brickell’s clinical trials may serve as scientific advisors or consultants to it from time to time and could receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be questioned by the FDA.

Brickell currently has limited marketing capabilities and no sales organization. If Brickell is unable to establish sales and marketing capabilities on its own or through third parties, Brickell will be unable to successfully commercialize its product candidates, if approved, or generate product revenue.

Brickell currently has limited marketing capabilities and no sales organization. To commercialize Brickell’s product candidates, if approved, in the United States, Canada, the European Union, Latin America and other jurisdictions it seeks to enter, Brickell must build its marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and Brickell may

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not be successful in doing so. Although Brickell’s employees have experience in the marketing, sale and distribution of pharmaceutical products, and business development activities involving external alliances, from prior employment at other companies, Brickell as a company has no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in building and managing a sales organization, including its ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of Brickell’s internal sales, marketing, distribution and pricing/reimbursement/access capabilities would impact adversely the commercialization of these products.

To commercialize sofpironium bromide in Asia, Brickell also intends to leverage the commercial infrastructure of its partner Kaken, which will provide Brickell with resources and expertise in certain areas that are greater than it could initially build itself. Brickell may choose to collaborate with additional third parties that have direct sales forces and established distribution systems, either to augment its own sales force and distribution systems or in lieu of Brickell’s own sales force and distribution systems. If Brickell is unable to enter into such arrangements on acceptable terms or at all, it may not be able to successfully commercialize its product candidates, especially in other countries where Brickell currently does not have a foreign legal presence. The inability to commercialize successfully Brickell’s product candidates, either on its own or through collaborations with one or more third parties, would harm Brickell’s business, financial condition, operating results and prospects.

Risks Related to Brickell’s Business

Brickell currently has no products approved for sale, and it may never obtain regulatory approval to commercialize any of its product candidates.

The research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, sale, marketing, distribution, import, export and reporting of safety and other post-market information related to its drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and in foreign countries, and such regulations differ from country to country and frequently are revised.

Even after Brickell or its partners achieve U.S. regulatory approval for a product candidate, if any, Brickell or its partners will be subject to continued regulatory review and compliance obligations. For example, with respect to Brickell’s product candidates, the FDA may impose significant restrictions on the approved indicated uses for which the product may be marketed or on the conditions of approval. A product candidate’s approval may contain requirements for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product. Brickell also will be subject to ongoing FDA obligations and continued regulatory review with respect to, among other things, the manufacturing, processing, labeling, packaging, distribution, pharmacovigilance and adverse event reporting, storage, advertising, promotion and recordkeeping for Brickell’s product candidates. These requirements include submissions of safety and other post-marketing information and reports, registration, continued compliance with cGMP requirements and with the FDA’s GCP requirements and GLP requirements, which are regulations and guidelines enforced by the FDA for all of Brickell’s product candidates in clinical and preclinical development, and for any clinical trials that it conducts post-approval, as well as continued compliance with the FDA’s laws governing commercialization of the approved product, including but not limited to the FDA’s Office of Prescription Drug Promotion (“OPDP”) regulation of promotional activities, fraud and abuse, product sampling, scientific speaker engagements and activities, formulary interactions as well as interactions with healthcare practitioners. To the extent that a product candidate is approved for sale in other countries, Brickell may be subject to similar or more onerous (i.e., prohibition on direct-to-consumer advertising that does not exist in the United States.) restrictions and requirements imposed by laws and government regulators in those countries.

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In addition, manufacturers of drug and biologic products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If Brickell or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the manufacturing, processing, distribution or storage facility where, or processes by which, the product is made, a regulatory agency may impose restrictions on that product or Brickell, including requesting that Brickell initiate a product recall, or requiring notice to physicians or the public, withdrawal of the product from the market, or suspension of manufacturing.

If Brickell, its product candidates or the manufacturing facilities for its product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

The regulations, policies or guidance of the FDA and other applicable government agencies may change, and new or additional statutes or government regulations may be enacted, including at the state and local levels, which can differ by geography and could prevent or delay regulatory approval of Brickell’s product candidates or further restrict or regulate post-approval activities. Brickell cannot predict the likelihood, nature or extent of adverse government regulations that may arise from future legislation or administrative action, either in the United States or abroad. If Brickell is not able to achieve and maintain regulatory compliance, it may not be permitted to commercialize its product candidates, which would adversely affect its ability to generate revenue and achieve or maintain profitability.

Brickell has conducted and may in the future conduct clinical trials for its product candidates outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from such trials.

Brickell has conducted and may in the future choose to conduct one or more of its clinical trials outside of the United States. Although the FDA or applicable foreign regulatory authority may accept data from clinical

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trials conducted outside the United States or the applicable jurisdiction, acceptance of such study data by the FDA or applicable foreign regulatory authority may be subject to certain conditions or exclusion. Where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless such data are applicable to the U.S. population and U.S. medical practice; the studies were performed by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Many foreign regulatory bodies have similar requirements. In addition, such foreign studies would be subject to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance the FDA or applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable home country. If the FDA or applicable foreign regulatory authority does not accept such data, it would likely result in the need for additional trials, which would be costly and time-consuming and delay aspects of Brickell’s business plan.

Brickell may face product liability exposure, and if successful claims are brought against it, Brickell may incur substantial liability if its insurance coverage for those claims is inadequate.

Brickell faces an inherent risk of product liability or similar causes of action as a result of the clinical testing of its product candidates and will face an even greater risk if Brickell commercializes any products. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority and notwithstanding Brickell complying with applicable laws on promotional activity. Brickell’s products and product candidates are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with Brickell’s product candidates could result in injury to a patient or potentially even death. Brickell cannot offer any assurance that it will not face product liability suits in the future, nor can it assure that its insurance coverage will be sufficient to cover its liability under any such cases.

In addition, a liability claim may be brought against Brickell even if its product candidates merely appear to have caused an injury. Product liability claims may be brought against Brickell by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with its product candidates, among others, and under some circumstances even government agencies. If Brickell cannot successfully defend itself against product liability or similar claims, it will incur substantial liabilities, reputational harm and possibly injunctions and punitive actions. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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Brickell has obtained product liability insurance coverage for its clinical trials. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects. Brickell’s insurance coverage may not be sufficient to cover all of its product liability-related expenses or losses and may not cover it for any expenses or losses it may suffer. Moreover, insurance coverage is becoming increasingly expensive, restrictive and narrow, and, in the future, Brickell may not be able to maintain adequate insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect it against losses due to product liability or other similar legal actions. Brickell will need to increase its product liability coverage if any of its product candidates receive regulatory approval, which will be costly, and it may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all and for all geographies in which Brickell wishes to launch. A successful product liability claim or series of claims brought against Brickell, if judgments exceed its insurance coverage, could decrease its cash and harm its business, financial condition, operating results and future prospects.

Brickell’s employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with whom Brickell may collaborate may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

Brickell is exposed to the risk that its employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with which Brickell may collaborate may engage in fraudulent or other illegal activity. Misconduct by these persons could include intentional, reckless, gross or negligent misconduct or unauthorized activity that violates: laws or regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA or foreign regulatory authorities; manufacturing standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; anticorruption laws, antikickback and Medicare/Medicaid rules, or laws that require the true, complete and accurate reporting of financial information or data, books and records. If any such or similar actions are instituted against Brickell and Brickell is not successful in defending itself or asserting Brickell’s rights, those actions could have a significant impact on Brickell’s business, including the imposition of civil, criminal and administrative and punitive penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, debarments, contractual damages, reputational harm, diminished profits and future earnings, injunctions, and curtailment or cessation of Brickell’s operations, any of which could adversely affect Brickell’s ability to operate Brickell’s business and Brickell’s operating results.

Brickell may be subject to risks related to off-label use of its product candidates.

The FDA strictly regulates the advertising and promotion of drug products, and drug products may only be marketed or promoted for their FDA approved uses, consistent with the product’s approved labeling. Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, state attorneys general, members of Congress and the public. Violations, including promotion of Brickell’s products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil, criminal and/or administrative sanctions by the FDA. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States will be heavily scrutinized by relevant foreign regulatory authorities.

Even if Brickell obtains regulatory approval for its product candidates, the FDA or comparable foreign regulatory authorities may require labeling changes or impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In the United States, engaging in impermissible promotion of Brickell’s product candidates for off-label uses can also subject it to false claims litigation under federal and state statutes, which can lead to civil, criminal and/or administrative penalties and fines and agreements, such as a corporate integrity agreement, that materially

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restrict the manner in which Brickell promotes or distributes its product candidates. If Brickell does not lawfully promote its products once they have received regulatory approval, Brickell may become subject to such litigation and, if it is not successful in defending against such actions, those actions could have a material adverse effect on its business, financial condition and operating results and even result in having an independent compliance monitor assigned to audit Brickell’s ongoing operations for a lengthy period of time.

Other than sofpironium bromide, Brickell’s product candidates are at the early stages of clinical and regulatory development.

Brickell is currently evaluating the next clinical development steps for BBI-3000 and BBI-6000 as each is in an early stage of clinical (prior to Phase 3) and pre-clinical development. The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, especially for early stage product candidates. The time required to obtain approval for early stage product candidates from the FDA and comparable foreign authorities is unpredictable but typically takes many years, involves significant costs and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. Brickell’s early stage product candidates will require substantial additional preclinical and clinical development before Brickell will be able to submit an application to the FDA, if at all. Accordingly, Brickell cannot assure you that it will be able to seek or obtain regulatory approval for any of its early stage product candidates.

Brickell’s clinical trials may fail to demonstrate the safety and efficacy of BBI-3000 or BBI-6000, or serious adverse or unacceptable side effects may be identified during their development, which could prevent or delay marketing approval and commercialization, increase Brickell’s costs or necessitate the abandonment or limitation of the development of BBI-3000 or BBI-6000.

Before obtaining marketing approvals for the commercial sale of BBI-3000 and BBI-6000, Brickell must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that BBI-3000 and BBI-6000 are both safe and effective for use in each target indication, and failures can occur at any stage of testing. Clinical trials often fail to demonstrate safety and are associated with side effects or have characteristics that are unexpected. Based on the safety profile seen in clinical testing, Brickell may need to abandon development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more tolerable from a risk-benefit perspective. The FDA or an IRB may also require that Brickell suspend, discontinue, or limit clinical trials based on safety information. Such findings could further result in regulatory authorities failing to provide marketing authorization for BBI-3000 or BBI-6000. Many drug candidates that initially showed promise in early stage testing and which were efficacious have later been found to cause side effects that prevented further development of the drug candidate and, in extreme cases, the side effects were not seen until after the drug was marketed, causing regulators to remove the drug from the market post-approval.

Brickell may choose not to continue developing or commercializing any of its early stage product candidates at any time during development or after approval, which would reduce or eliminate its potential return on investment for those product candidates.

At any time, Brickell may decide to discontinue the development of any of its early stage product candidates for a variety of reasons, including the appearance of new technologies that make its product obsolete, competition from a competing product or changes in or failure to comply with applicable regulatory requirements. If Brickell terminates a program in which it has invested significant resources, Brickell will not receive any return on its investment and it will have missed the opportunity to have allocated those resources to potentially more productive uses.

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Healthcare reform measures could hinder or prevent the commercial success of Brickell’s product candidates.

The current presidential administration and certain members of the majority of the U.S. Congress have sought to repeal all or part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, “Affordable Care Act”), and implement a replacement program. For example, the so-called “individual mandate” was repealed as part of tax reform legislation adopted in December 2017, such that the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Code was eliminated beginning in 2019. In addition, litigation may prevent some or all of the Affordable Care Act legislation from taking effect. For example, on December 14, 2018, the U.S. District Court for the Northern District of Texas held that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the tax reform legislation, the remaining provisions of the Affordable Care Act are invalid as well. The impact of this ruling is stayed as it is appealed to the Fifth Circuit Court of Appeals. While the ruling will have no immediate effect, it is unclear how this decision, and subsequent appeals, if any, will impact the law. In 2019 and beyond, Brickell may face additional uncertainties as a result of likely federal and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the Affordable Care Act. There is no assurance that the Affordable Care Act, as amended in the future, will not adversely affect Brickell’s business and financial results.

Additionally, in October 2018, the U.S. President proposed to lower Medicare Part B drug prices, in addition to contemplating other measures to lower prescription drug prices. While this proposal has not yet been enacted, Brickell expects that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for its product candidates if approved or additional pricing pressures.

There are also calls to ban all direct-to-consumer advertising of pharmaceuticals, which would limit Brickell’s ability to market its product candidates. The United States is in a minority of jurisdictions that allow this kind of advertising and its removal could limit the potential reach of a marketing campaign.

Brickell may also be subject to stricter healthcare laws, regulation and enforcement, and its failure to comply with those laws could adversely affect its business, operations and financial condition.

Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to Brickell’s business. Brickell is subject to regulation by both the federal government and the states in which it or its partners conduct business. The healthcare laws and regulations that may affect Brickell’s ability to operate include: the federal Anti-Kickback Statute; federal civil and criminal false claims laws and civil monetary penalty laws; the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the Prescription Drug Marketing Act (for sampling of drug product among other things); the federal physician sunshine requirements under the Affordable Care Act; the Foreign Corrupt Practices Act as it applies to activities outside of the United States; the new federal Right-to-Try legislation; and state law equivalents of many of the above federal laws.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of Brickell’s business activities could be subject to challenge under one or more of such laws. In addition, recent healthcare reform legislation has strengthened these laws. For example, the recently enacted Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Achieving and sustaining compliance with these laws may prove costly. In addition, any action against Brickell for violation of these laws, even if Brickell successfully defends against it, could cause Brickell to incur

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significant legal expenses and divert its management’s attention from the operation of its business and result in reputational damage. If Brickell’s operations are found to be in violation of any of the laws described above or any other governmental laws or regulations that apply to Brickell, it may be subject to penalties, including administrative, civil and criminal penalties, damages, including punitive damages, fines, disgorgement, the exclusion from participation in federal and state healthcare programs, individual imprisonment or the curtailment or restructuring of its operations, and injunctions, any of which could adversely affect Brickell’s ability to operate its business and its financial results.

Brickell intends to in-license and acquire product candidates and may engage in other strategic transactions, which could impact its liquidity, increase its expenses and present significant distractions to its management.

Brickell’s strategy is to in-license and acquire product candidates and it may engage in other strategic transactions. Additional potential transactions that Brickell may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require Brickell to incur non-recurring or other charges, may increase its near- and long-term expenditures and may pose significant integration challenges or disrupt its management or business, which could adversely affect its operations and financial results. Accordingly, there can be no assurance that Brickell will undertake or successfully complete any transactions of the nature described above, and any transaction that it does complete could harm its business, financial condition, operating results and prospects. Brickell has no current plan, commitment or obligation to enter into any transaction described above, and Brickell is not engaged in discussions related to additional partnerships.

Brickell’s failure successfully to in-license, acquire, develop and market additional product candidates or approved products would impair its ability to grow its business.

Brickell intends to in-license, acquire, develop and market additional products and product candidates. Because Brickell’s internal research and development capabilities are limited, it may be dependent on pharmaceutical companies, academic or government scientists and other researchers to sell or license products or technology to it. The success of this strategy depends partly on Brickell’s ability to identify and select promising pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners, and finance these arrangements.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with Brickell for the license or acquisition of product candidates and approved products. Brickell has limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into its current infrastructure. Moreover, Brickell may devote resources to potential acquisitions or licensing opportunities that are never completed, or Brickell may fail to realize the anticipated benefits of such efforts. Brickell may not be able to acquire the rights to additional product candidates on terms that it finds acceptable or at all.

Further, any product candidate that Brickell acquires may require additional development efforts prior to commercial sale, including preclinical or clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, Brickell cannot provide assurance that any approved products that it acquires will be manufactured or sold profitably or achieve market acceptance.

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Risks Related to Brickell’s Dependence on Third Parties

Under the Funding Agreement, NovaQuest has the right to suspend product development payments in certain circumstances.

On June 2, 2019, Brickell and NovaQuest entered into the Funding Agreement, pursuant to which NovaQuest has agreed, following consummation of the Merger, to partially fund Brickell’s expenses relating to product development activities in respect of sofpironium bromide, subject to the terms and conditions contained in the Funding Agreement. NovaQuest may suspend its payments under the Funding Agreement in certain limited circumstances, including: (i) adverse regulatory events relating to sofpironium bromide; (ii) termination of any material clinical study in respect of sofpironium bromide; (iii) an event reasonably expected to delay U.S. approval or launch of sofpironium bromide by 12 months or more; (iv) a material amendment of the study protocol for Brickell’s Phase 3 clinical trials in respect of its sofpironium bromide product candidate without NovaQuest’s consent; (v) if Brickell determines that sofpironium bromide is unsafe; (vi) the failure of sofpironium bromide to achieve the primary endpoints for its Phase 3 clinical trials; (vii) sofpironium bromide receiving a final non-approval letter from the FDA or European Medicines Agency; and (viii) if certain of Brickell’s senior executives cease to work for Brickell and Brickell does not hire replacements reasonably acceptable to NovaQuest in a reasonable time. NovaQuest’s obligation to make the payments will resume upon NovaQuest’s notice to Brickell that the condition allowing NovaQuest to suspend payments has been resolved or cured. NovaQuest may terminate its obligation to pay any further payments if such condition is not resolved or cured within 12 months. If NovaQuest’s payment obligations terminate in these circumstances, Brickell will remain obligated to make the milestone payments contemplated in the Funding Agreement to NovaQuest in the event Brickell nonetheless receives FDA approval for sofpironium bromide, and Brickell will remain obligated to make revenue sharing payments in the territory covered by the Funding Agreement in the event Brickell launches sofpironium bromide anywhere in that territory.

If Brickell suspends or terminates the development program for sofpironium bromide under certain circumstances, Brickell will be obligated to pay NovaQuest $25 million plus interest.

Under the Funding Agreement with NovaQuest, Brickell is not permitted to suspend or discontinue the development program in respect of sofpironium bromide except in certain circumstances. If Brickell suspends or terminates the development program following completion of Phase 3 clinical trials because the FDA requires an additional study or additional, unexpected development work, and Brickell reasonably determines that the additional study or work would take longer than 18 months to complete or cost more than an established threshold, Brickell is entitled to terminate the development program. In that case, Brickell would be obligated to pay NovaQuest plus interest from the date of the Funding Agreement until the date on which the payment is made (however, in the event that Brickell terminates its development program for sofpromium bromide for certain reasons, including serious safety issues, a failure of the product’s Phase 3 studies, or the failure of the FDA to approve the product, Brickell will not be obligated to make any payments to NovaQuest). If Brickell subsequently resumes development of sofpironium bromide, Brickell will remain obligated to make the milestone payments contemplated in the Funding Agreement to NovaQuest in the event Brickell nonetheless receives FDA approval for sofpironium bromide, and Brickell will remain obligated to make revenue sharing payments in the territory covered by the Funding Agreement in the event Brickell launches a sofpironium product anywhere in that territory, with any such payment made upon termination of the program credited against the milestone payment or revenue sharing payments.

If Brickell breaches the Funding Agreement, NovaQuest may terminate the agreement and exercise rights under a related Security Agreement, including foreclosing on Brickell’s assets relating to sofpironium bromide in the United States and accelerating certain payments.

Under Brickell’s Funding Agreement with NovaQuest, Brickell makes various representations and warranties and commits to comply with various covenants. NovaQuest may terminate the Funding Agreement and terminate its obligation to make certain payments in the event of Brickell’s material uncured breach of a

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representation or covenant under the Funding Agreement. Brickell will also enter into a Security Agreement (the “Security Agreement”) with NovaQuest immediately following consummation of the Merger. Under the Security Agreement, NovaQuest will be able to exercise certain rights in the event of an event of default. An event of default would occur if (i) Brickell fails to make payments due under the Funding Agreement, (ii) Brickell terminates the Funding Agreement under circumstances giving rise to a payment obligation to NovaQuest and fails to make the required payment, as described above under “—If Brickell suspends or terminates the development program for Brickell’s sofpironium bromide product candidate under certain circumstances, Brickell will be obligated to pay NovaQuest $25 million plus interest,” (iii) if Brickell fails to comply with a covenant to maintain certain minimum cash balances specified in the Funding Agreement, or (iv) the occurrence of certain insolvency events affecting Brickell or other related entities that are, or become parties to, the Security Agreement. NovaQuest’s rights following an event of default include, among other things, foreclosing on Brickell’s assets in the territory relating to Brickell’s sofpironium bromide product candidate and, in certain circumstances, accelerating payment obligations under the Funding Agreement.

Brickell expects to rely on its collaboration with third-party out-license partners for the successful development and commercialization of its product candidates.

Brickell expects to rely upon the efforts of third-party out-license partners for the successful development and commercialization of Brickell’s current and future product candidates. The clinical and commercial success of Brickell’s product candidates may depend upon maintaining successful relationships with third-party out-license partners which are subject to a number of significant risks, including the following:

Brickell cannot assure you that it will be able to establish or maintain third-party out-license partner relationships in order to successfully develop and commercialize its product candidates.

Brickell relies completely on third-party contractors to supply, manufacture and distribute clinical drug supplies for its product candidates, including certain sole-source suppliers and manufacturers; Brickell intends to rely on third parties for commercial supply, manufacturing and distribution if any of its product candidates receive regulatory approval; and Brickell expects to rely on third parties for supply, manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates.

Brickell does not currently have, nor does it plan to acquire, the infrastructure or capability to supply, store, manufacture or distribute preclinical, clinical or commercial quantities of drug substances or products. Additionally, Brickell has not entered into a long-term commercial supply agreement to provide it with such drug substances or products. As a result, Brickell’s ability to develop its product candidates is dependent, and Brickell’s ability to supply its products commercially will depend, in part, on Brickell’s ability to obtain the APIs and other substances and materials used in its product candidates successfully from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient

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quantities for preclinical and clinical testing and commercialization. If Brickell fails to develop and maintain supply and other technical relationships with these third parties, it may be unable to continue to develop or commercialize its products and product candidates.

Brickell does not have direct control over whether its contract suppliers and manufacturers will maintain current pricing terms, be willing to continue supplying Brickell with APIs and finished products or maintain adequate capacity and capabilities to serve its needs, including quality control, quality assurance and qualified personnel. Brickell is dependent on its contract suppliers and manufacturers for day-to-day compliance with applicable laws and cGMPs for production of both APIs and finished products. If the safety or quality of any product or product candidate or component is compromised due to a failure to adhere to applicable laws or for other reasons, Brickell may not be able to commercialize or obtain regulatory approval for the affected product or product candidate successfully, and Brickell may be held liable for injuries sustained as a result.

In order to conduct larger or late-stage clinical trials for its product candidates and supply sufficient commercial quantities of the resulting drug product and its components, if that product candidate is approved for sale, Brickell’s contract manufacturers and suppliers will need to produce its drug substances and product candidates in larger quantities, more cost-effectively and, in certain cases, at higher yields than they currently achieve. If Brickell’s third-party contractors are unable to scale up the manufacture of any of its product candidates successfully in sufficient quality and quantity and at commercially reasonable prices, or are shut down or put on clinical hold by government regulators, and Brickell is unable to find one or more replacement suppliers or manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and Brickell is unable to transfer the processes successfully on a timely basis, the development of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could significantly harm its business, financial condition, operating results and prospects.

Brickell expects to continue to depend on third-party contract suppliers and manufacturers for the foreseeable future. Brickell’s supply and manufacturing agreements, if any, do not guarantee that a contract supplier or manufacturer will provide services adequate for its needs. Additionally, any damage to or destruction of Brickell’s third-party manufacturer’s or suppliers’ facilities or equipment, even by force majeure, may significantly impair its ability to have its products and product candidates manufactured on a timely basis. Brickell’s reliance on contract manufacturers and suppliers further exposes it to the possibility that they, or third parties with access to their facilities, will have access to and may misappropriate Brickell’s trade secrets or other proprietary information. In addition, the manufacturing facilities of certain of Brickell’s suppliers may be located outside of the United States. This may give rise to difficulties in importing Brickell’s products or product candidates or their components into the United States or other countries.

Manufacturing and supply of the APIs and other substances and materials used in Brickell’s product candidates and finished drug products is a complex and technically challenging undertaking, and there is potential for failure at many points in the manufacturing, testing, quality control and assurance and distribution supply chain, as well as the potential for latent defects after products have been manufactured and distributed.

Manufacturing and supply of APIs, other substances and materials and finished drug products is technically challenging. Changes beyond Brickell’s direct control can impact the quality, volume, price and successful delivery of its products and product candidates and can impede, delay, limit or prevent the successful development and commercialization of its products and product candidates. Mistakes and mishandling are not uncommon despite reasonable best efforts and can affect successful production and supply. Some of these risks include but are not limited to:

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Any of these factors could result in delays or higher costs in connection with Brickell’s clinical trials, regulatory submissions, required approvals or commercialization of its products, which could harm its business, financial condition, operating results and prospects.

Risks Related to Brickell’s Financial Operations

Brickell will need to raise additional financing in the future to fund Brickell’s operations, which may not be available to it on favorable terms or at all.

Brickell will require substantial additional funds to conduct the costly and time-consuming clinical efficacy trials necessary to pursue regulatory approval of each potential product candidate and to continue the development of sofpironium bromide in new indications or uses. Brickell’s future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’ ownership interests or inhibit Brickell’s ability to achieve its business objectives. If Brickell raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely the rights of its common stockholders. Further, to the extent that Brickell raises additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest in the combined company will be diluted. In addition, any debt financing may subject Brickell to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Brickell raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, Brickell may have to relinquish certain valuable intellectual property or other rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if Brickell were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to Brickell or its stockholders.

Brickell’s operating results and liquidity needs could be affected negatively by global market fluctuations and economic downturn.

Brickell’s operating results and liquidity could be affected negatively by global economic conditions generally, both in the United States and elsewhere around the world. The market for discretionary medical

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products and procedures may be particularly vulnerable to unfavorable economic conditions. Some patients may consider sofpironium bromide as discretionary, and if full reimbursement for the product is not available, demand for the product may be tied to the discretionary, out-of-pocket cash-spending levels of Brickell’s targeted patient populations. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic conditions and concerns. In the event these economic conditions and concerns continue or worsen and the markets continue to remain volatile, or a bear market ensues in the U.S. stock market given the current bull market is the longest on record, Brickell’s operating results and liquidity could be affected adversely by those factors in many ways, including weakening demand for sofpironium bromide, making it more difficult for Brickell to raise funds if necessary, and Brickell’s stock price may decline.

Brickell expects its stock price to be highly volatile.

The market price of Brickell’s shares following the Merger could be subject to significant fluctuations. Market prices for securities of biotechnology and other life sciences companies historically have been particularly volatile subject even to large daily price swings. Some of the factors that may cause the market price of Brickell’s shares to fluctuate include, but are not limited to:

Moreover, the stock markets in general have experienced substantial volatility in our industry that has often been unrelated to the operating performance of individual companies or a certain industry segment. These broad market fluctuations may also adversely affect the trading price of the combined company’s shares.

In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm the combined company’s profitability and reputation. In addition, such securities litigation often has ensued after a reverse merger or other merger and acquisition activity of the type engaged in here by Brickell with Vical. Such litigation if brought could impact negatively the combined company’s business.

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Brickell’s operating results may fluctuate significantly, which makes its future operating results difficult to predict and could cause its operating results to fall below expectations.

Brickell’s operations to date have been limited primarily to researching and developing sofpironium bromide and undertaking preclinical studies and clinical trials of sofpironium bromide. Brickell has not yet obtained regulatory approvals for sofpironium bromide in any country. Consequently, any predictions you or Brickell make about its future success or viability may not be as accurate as they could be if Brickell had a longer operating history or approved products on the market. Brickell’s revenue and profitability will depend on development funding and the achievement of development and clinical milestones under an agreement with Kaken, as well as any potential future collaboration and license agreements and sales of sofpironium bromide or future products, if approved. These up-front and milestone payments may vary significantly from period to period, and any such variance could cause a significant fluctuation in Brickell’s operating results from one period to the next. In addition, Brickell will measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award as determined by its board of directors and recognize the cost as an expense over the employee’s requisite service period. As the variables that Brickell uses as a basis for valuing these awards change over time, including its underlying stock price and stock price volatility, the magnitude of the expense that Brickell must recognize may vary significantly. Furthermore, Brickell’s operating results may fluctuate due to a variety of other factors, many of which are outside of its control and may be difficult to predict.

The former Vical stockholders may sell their shares of the combined company.

Pursuant to the Merger Agreement, the stockholders of Vical are not required to agree to restrictions on selling their stock. As such, the former Vical stockholders may sell their stock of the combined company after the Merger, which could lead to a decline in the market value of Brickell’s stock and could negatively impact future issuances of the combined company’s equity securities.

The combined company will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined company will incur significant legal, accounting and other expenses that Brickell did not incur as a private company, including costs associated with public company reporting and other SEC requirements. The combined company also will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new rules implemented by the SEC and Nasdaq. These rules and regulations are expected to increase the combined company’s legal and financial compliance costs and to make some activities more time-consuming and costly. The combined company’s executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations may also make it expensive for the combined company to operate its business.

The combined company is expected to take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result in its common stock being less attractive to investors.

Following the Merger, the combined company is expected to have a public float of less than $250 million and therefore will qualify as a smaller reporting company under the rules of the SEC. As a smaller reporting company the combined company will be able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in its SEC filings. Decreased disclosures in the combined company’s SEC filings due to its status as a smaller reporting company may make it harder for investors to analyze its results of operations and financial prospects. We cannot predict if investors will find the combined company’s common stock less attractive if it relies on these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading

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market for its common stock and its stock price may be more volatile. The combined company may take advantage of the reporting exemptions applicable to a smaller reporting company until it is no longer a smaller reporting company, which status would end once it has a public float greater than $250 million. In that event, the combined company could still be a smaller reporting company if its annual revenues were below $100 million and it has a public float of less than $700 million.

The combined company does not anticipate paying any dividends in the foreseeable future.

The current expectation is that the combined company will retain its future earnings to fund the development and growth of the company’s business. As a result, capital appreciation, if any, of the shares of the combined company will be your sole source of gain, if any, for the foreseeable future.

If Brickell fails to attract and retain management and other key personnel, it may be unable to continue to successfully develop or commercialize its product candidates or otherwise implement its business plan.

Brickell’s ability to compete in the highly competitive pharmaceuticals industry depends on its ability to attract and retain highly qualified managerial, scientific, medical, legal, sales and marketing and other personnel. Brickell is highly dependent on its management and scientific personnel. The loss of the services of any of these individuals could impede, delay or prevent the successful development of Brickell’s product pipeline, completion of its planned clinical trials, commercialization of its product candidates or in-licensing or acquisition of new assets and could impact negatively its ability to implement successfully its business plan. If Brickell loses the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and its business could be harmed as a result. Brickell might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses.

Brickell’s ability to use its net operating loss carry-forwards to offset future taxable income may be subject to certain limitations.

As of December 31, 2018, Brickell had approximately $36.5 million of federal and $30.9 million of state operating loss carry-forwards available to offset future taxable income, which expire in varying amounts beginning in 2030 for federal and state purposes if unused. It is possible that Brickell will not generate taxable income in time to use these loss carry-forwards before their expiration. Brickell’s net operating loss carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. In addition, Brickell may experience ownership changes in the future as a result of offerings of our stock or subsequent shifts in its stock ownership, some of which are outside of its control. In that case, the ability to use net operating loss carry-forwards to offset future taxable income will be limited following any such ownership change.

Brickell may be adversely affected by natural disasters and other catastrophic events and by man-made problems such as terrorism that could disrupt its business operations, and its business continuity and disaster recovery plans may not adequately protect it from a serious disaster.

Brickell’s corporate office is located in Boulder, Colorado, near a major flood and blizzard zone. If a disaster, power outage, computer hacking, or other event occurred that prevented Brickell from using all or a significant portion of an office, that damaged critical infrastructure, such as enterprise financial systems, IT systems, manufacturing resource planning or enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for it to continue its business for a substantial period of time. Brickell’s contract manufacturer’s and suppliers’ facilities are located in multiple locations where other natural disasters or similar events, such as tornadoes, fires, explosions or large-scale accidents or power outages, or IT threats, could severely disrupt Brickell’s operations and have a material adverse effect on its business, financial condition, operating results and prospects. In addition, acts of terrorism and other geo-political unrest could cause

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disruptions in Brickell’s business or the businesses of its partners, manufacturers or the economy as a whole. All of the aforementioned risks may be further increased if Brickell does not implement a disaster recovery plan or its partners’ or manufacturers’ disaster recovery plans prove to be inadequate. To the extent that any of the above should result in delays in the regulatory approval, manufacture, distribution or commercialization of sofpironium bromide, its business, financial condition, operating results and prospects would suffer.

Brickell’s business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in its cyber-security.

Despite the implementation of security measures, Brickell’s internal computer systems and those of its current and future CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. While Brickell has not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in Brickell’s operations, it could result in a material disruption of its development programs and its business operations. In addition, since Brickell sponsors clinical trials, any breach that compromises patient data and identities causing a breach of privacy could generate significant reputational damage and legal liabilities and costs to recover and repair, including affecting trust in the company to recruit for future clinical trials. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in Brickell’s regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, Brickell’s data or applications or inappropriate disclosure of confidential or proprietary information, Brickell could incur liability and the further development and commercialization of its products and product candidates could be delayed.

Risks Related To Brickell’s Intellectual Property

Brickell may not be able to obtain, maintain or enforce global patent rights or other intellectual property rights that cover sofpironium bromide and technologies that are of sufficient breadth to prevent third parties from competing against Brickell.

Brickell’s success with respect to sofpironium bromide will depend, in part, on its ability to obtain and maintain patent protection in both the United States and other countries, to preserve its trade secrets and to prevent third parties from infringing on its proprietary rights. Brickell’s ability to protect sofpironium bromide from unauthorized or infringing use by third parties depends in substantial part on its ability to obtain and maintain valid and enforceable patents around the world.

The patent application process, also known as patent prosecution, is expensive and time-consuming, and Brickell and its current or future licensors and licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner in all the countries that are desirable. It is also possible that Brickell or its current licensors, or any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, these and any of Brickell’s patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of its business. Moreover, Brickell’s competitors independently may develop equivalent knowledge, methods and know-how or discover workarounds to Brickell patents that would not constitute infringement. Any of these outcomes could impair Brickell’s ability to enforce the exclusivity of its patents effectively, which may have an adverse impact on its business, financial condition and operating results.

Due to legal standards relating to patentability, validity, enforceability and claim scope of patents covering pharmaceutical inventions, Brickell’s ability to obtain, maintain and enforce patents is uncertain and involves

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complex legal and factual questions especially across countries. Accordingly, rights under any existing patents or any patents Brickell might obtain or license may not cover its product candidates or may not provide Brickell with sufficient protection for its product candidates to afford a sustainable commercial advantage against competitive products or processes, including those from branded, generic and over-the-counter pharmaceutical companies. In addition, Brickell cannot guarantee that any patents or other intellectual property rights will issue from any pending or future patent or other similar applications owned by or licensed to Brickell. Even if patents or other intellectual property rights have issued or will issue, Brickell cannot guarantee that the claims of these patents and other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide Brickell with any significant protection against competitive products or otherwise be commercially valuable to Brickell in every country of commercial significance that Brickell may target.

Competitors in the field of dermatologic therapeutics have created a substantial amount of prior art, including scientific publications, posters, presentations, patents and patent applications and other public disclosures including on the Internet. Brickell’s ability to obtain and maintain valid and enforceable patents depends on whether the differences between its technology and the prior art allow its technology to be patentable over the prior art. Brickell does not have outstanding issued patents covering all of the recent developments in its technology and is unsure of the patent protection that it will be successful in obtaining, if any. Even if the patents do successfully issue, third parties may design around or challenge the validity, enforceability or scope of such issued patents or any other issued patents Brickell owns or licenses, which may result in such patents being narrowed, invalidated or held unenforceable. If the breadth or strength of protection provided by the patents Brickell holds or pursues with respect to its product candidates is challenged, it could dissuade companies from collaborating with Brickell to develop or threaten its ability to commercialize or finance its product candidates.

The laws of some foreign jurisdictions do not provide intellectual property rights to the same extent or duration as in the United States, and many companies have encountered significant difficulties in acquiring, maintaining, protecting, defending and especially enforcing such rights in foreign jurisdictions. If Brickell encounters such difficulties in protecting or are otherwise precluded from effectively protecting its intellectual property in foreign jurisdictions, its business prospects could be substantially harmed, especially internationally.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed, with patent term extensions granted in certain instances to compensate for part of the period in which the drug was under development and could not be commercialized while under the patent. Without patent protection for sofpironium bromide, it may be open to competition from generic versions of sofpironium bromide. The issued U.S. patents relating to sofpironium bromide run through 2031, including expected extensions just described. Brickell also filed a new composition of matter patent application in the United States that would provide expected coverage through 2040, if approved.

Proprietary trade secrets and unpatented know-how are also very important to Brickell’s business. Although Brickell has taken steps to protect its trade secrets and unpatented know-how by entering into confidentiality agreements with third parties, and intellectual property protection agreements with officers, directors, employees, and certain consultants and advisors, there can be no assurance that binding agreements will not be breached or enforced by courts, that Brickell would have adequate remedies for any breach, including injunctive and other equitable relief, or that its trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by Brickell or its agents and representatives, or be independently discovered by its competitors. If trade secrets are independently discovered, Brickell would not be able to prevent their use and if Brickell and its agents or representatives inadvertently disclose trade secrets and/or unpatented know-how, Brickell may not be allowed to retrieve this and maintain the exclusivity it previously enjoyed.

Brickell may not be able to protect its intellectual property rights throughout the world.

Filing, prosecuting and defending patents on Brickell’s product candidates does not guarantee exclusivity. The requirements for patentability differ in certain countries, particularly developing countries. In addition, the

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laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the United States, especially when it comes to granting use and other kinds of patents and what kind of enforcement rights will be allowed, especially injunctive relief in a civil infringement proceeding. Consequently, Brickell may not be able to prevent third parties from practicing its inventions in all countries outside the United States and even in launching an identical version of Brickell’s product notwithstanding Brickell has a valid patent in that country. Competitors may use Brickell’s technologies in jurisdictions where it has not obtained patent protection to develop their own products, or produce copy products, and, further, may export otherwise infringing products to territories where Brickell has patent protection but enforcement on infringing activities is inadequate or where Brickell has no patents. These products may compete with Brickell’s products, and Brickell’s patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals, and the judicial and government systems are often corrupt, which could make it difficult for Brickell to stop the infringement of its patents or marketing of competing products in violation of its proprietary rights generally. Proceedings to enforce its patent rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its global patents at risk of being invalidated or interpreted narrowly and its global patent applications at risk of not issuing, and could provoke third parties to assert claims against it. Brickell may not prevail in any lawsuits that Brickell initiates or infringement actions brought against Brickell, and the damages or other remedies awarded, if any, may not be commercially meaningful when Brickell is the plaintiff. When Brickell is the defendant it may be required to post large bonds to stay in the market while it defends itself from an infringement action.

In addition, certain countries in Europe and certain developing countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties, especially if the patent owner does not enforce or use its patents over a protracted period of time. In some cases, the courts will force compulsory licenses on the patent holder even when finding the patent holder’s patents are valid if the court believes it is in the best interests of the country to have widespread access to an essential product covered by the patent. In these situations the royalty the court requires to be paid by the licenseholder receiving the compulsory license is not calculated at fair market value and can be inconsequential, thereby disaffecting the patentholder’s business. In these countries, Brickell may have limited remedies if its patents are infringed or if Brickell is compelled to grant a license to its patents to a third party, which could also materially diminish the value of those patents. This would limit its potential revenue opportunities. Accordingly, Brickell’s efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that Brickell owns or licenses, especially in comparison to what it enjoys from enforcing its intellectual property rights in the Unites States. Finally, the company’s ability to protect and enforce its intellectual property rights may be adversely affected by unforeseen changes in both U.S. and foreign intellectual property laws, or changes to the policies in various government agencies in these countries, including but not limited to the patent office issuing patents and the health agency issuing pharmaceutical product approvals For example, in Brazil, pharmaceutical patents require initial approval of the Brazilian health agency (ANVISA). Finally, many countries have large backlogs in patent prosecution, and in some countries in Latin America it can take years, even decades, just to get a pharmaceutical patent application reviewed notwithstanding the merits of the application.

Obtaining and maintaining Brickell’s patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar

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provisions during the patent application process. While an inadvertent lapse can, in many cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction just for failure to know about and/or timely pay a prosecution fee. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees in prescribed time periods, and failure to properly legalize and submit formal documents in the format and style the country requires. If Brickell or its licensors fail to maintain the patents and patent applications covering its product candidates for any reason, the company’s competitors might be able to enter the market, which would have an adverse effect on Brickell’s business.

If Brickell fails to comply with its obligations under its intellectual property license agreements, it could lose license rights that are important to its business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope of its rights to the relevant intellectual property or technology, or increase its financial or other obligations to its licensors.

Brickell has entered into in-license arrangements with respect to certain of its product candidates. These license agreements impose various diligence, milestone, royalty, insurance and other obligations on Brickell. If Brickell fails to comply with these obligations, the respective licensors may have the right to terminate the license, in which event Brickell may not be able to develop or market the affected product candidate. The loss of such rights could materially adversely affect its business, financial condition, operating results and prospects. For more information about these license arrangements, see “Description of Brickell’s Business—Collaborations and Out-License Agreements.”

Brickell’s commercial success depends on its ability to develop, manufacture, market and sell its product candidates and use its proprietary technologies without infringing the proprietary rights of third parties. Brickell cannot assure that marketing and selling such candidates and using such technologies will not infringe existing or future patents. Numerous U.S.- and foreign-issued patents and pending patent applications owned by third parties exist in the fields relating to its product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert that its product candidates, technologies or methods of delivery or use infringe their patent rights. Moreover, it is not always clear to industry participants, including us, which patents and other intellectual property rights cover various drugs, biologics, drug delivery systems or their methods of use, and which of these patents may be valid and enforceable. Thus, because of the large number of patents issued and patent applications filed in Brickell’s fields across many countries, there may be a risk that third parties may allege they have patent rights encompassing Brickell’s product candidates, technologies or methods.

In addition, there may be issued patents of third parties that are infringed or are alleged to be infringed by Brickell’s product candidates or proprietary technologies notwithstanding patents Brickell may possess. Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing and because publications in the scientific literature often lag behind actual discoveries, Brickell cannot be certain that others have not filed patent applications for technology covered by its own and in-licensed issued patents or its pending applications. Brickell’s competitors may have filed, and may in the future file, patent applications covering Brickell’s own product candidates or technology similar to Brickell’s technology. Any such patent application may have priority over Brickell’s own and in-licensed patent applications or patents, which could further require Brickell to obtain rights to issued patents covering such technologies, which may mean paying significant licensing fees or the like. If another party has filed a U.S. patent application on inventions similar to those owned or in-licensed to us, Brickell or, in the case of in-licensed technology, the licensor may have to participate, in the United States, in an interference proceeding to determine priority of invention.

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Brickell may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that its product candidates or proprietary technologies infringe such third parties’ intellectual property rights, including litigation resulting from filing under Paragraph IV of the Hatch-Waxman Act or other countries’ laws similar to the Hatch-Waxman Act. These lawsuits could claim that there are existing patent rights for such drug, and this type of litigation can be costly and could adversely affect its operating results and divert the attention of managerial and technical personnel, even if Brickell does not infringe such patents or the patents asserted against Brickell is ultimately established as invalid. There is a risk that a court would decide that Brickell is infringing the third party’s patents and would order Brickell to stop the activities covered by the patents. In addition, there is a risk that a court will order Brickell to pay the other party significant damages for having violated the other party’s patents.

Because Brickell relies on certain third-party licensors and partners and will continue to do so in the future, if one of its licensors or partners is sued for infringing a third party’s intellectual property rights, Brickell’s business, financial condition, operating results and prospects could suffer in the same manner as if Brickell were sued directly. In addition to facing litigation risks, Brickell has agreed to indemnify certain third-party licensors and partners against claims of infringement caused by Brickell’s proprietary technologies, and Brickell has entered or may enter into cost-sharing agreements with some its licensors and partners that could require Brickell to pay some of the costs of patent litigation brought against those third parties whether or not the alleged infringement is caused by its proprietary technologies. In certain instances, these cost-sharing agreements could also require Brickell to assume greater responsibility for infringement damages than would be assumed just on the basis of its technology.

The occurrence of any of the foregoing could adversely affect Brickell’s business, financial condition or operating results.

Brickell may be subject to claims that its officers, directors, employees, consultants or independent contractors have wrongfully used or disclosed to Brickell alleged trade secrets of their former employers or their former or current customers.

As is common in the biotechnology and pharmaceutical industries, certain of Brickell’s employees were formerly employed by other biotechnology or pharmaceutical companies, including its competitors or potential competitors. Moreover, Brickell engages the services of consultants to assist Brickell in the development of Brickell’s products and product candidates, many of whom were previously employed at, or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including its competitors or potential competitors. Brickell may be subject to claims that these employees and consultants or Brickell has inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Although Brickell has no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims. Even if Brickell is successful in defending against any such claims, any such litigation could be protracted, expensive, a distraction to its management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. These forward-looking statements are intended to provide management’s current expectations or plans for future operating and financial performance of the combined company following the Merger, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “may,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties and other factors that could cause actual results to differ from these forward-looking statements include, but are not limited to, risks and uncertainties detailed in the section titled “Risk Factors” beginning on page 25. The statements made in this proxy statement regarding the following subject matters are forward-looking by their nature:

The preceding list is not intended to be an exhaustive list of all forward-looking statements in this proxy statement. You should read this proxy statement with the understanding that actual future results, levels of activity, performance and achievements may be materially different from what is currently expected. We qualify all of the forward-looking statements by these cautionary statements.

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There can be no assurance that the Merger or any other Contemplated Transaction described in this proxy statement will in fact be completed in the manner described or at all. Any forward-looking statement speaks only as of the date on which it is made, and Vical, Brickell and the combined company assume no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

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THE SPECIAL MEETING OF VICAL STOCKHOLDERS

Date, Time and Place

The Special Meeting of Vical stockholders will be held on [●], 2019, commencing at 8:00 a.m. local time, at Cooley LLP, 4401 Eastgate Mall, San Diego, California 92121. Vical is sending this proxy statement to its stockholders in connection with the solicitation of proxies by Vical’s board of directors for use at the Special Meeting and any adjournments or postponements of the Special Meeting. This proxy statement is first being furnished to stockholders of Vical on or about [●], 2019.

Purposes of the Special Meeting

The purposes of the Special Meeting are:

Recommendation of the Vical Board of Directors

Record Date and Voting Power

Only holders of record of Vical common stock at the close of business on the record date, July 2, 2019, are entitled to notice of, and to vote at, the Special Meeting. There were 125 holders of record of Vical common stock at the close of business on the record date. At the close of business on the record date, 22,841,278 shares of Vical common stock were issued and outstanding. Each share of Vical common stock entitles the holder thereof

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to one vote on each matter submitted for stockholder approval. See the section titled “Principal Stockholders of Vical” in this proxy statement for information regarding persons known to the management of Vical to be the beneficial owners of more than 5% of the outstanding shares of Vical common stock.

Voting and Revocation of Proxies

The proxy accompanying this proxy statement is being solicited on behalf of the board of directors of Vical for use at the Special Meeting.

If you are a stockholder of record of Vical as of the record date referred to above, you may vote in person at the Special Meeting or vote by proxy using the enclosed proxy card, over the telephone or via the Internet. Whether or not you plan to attend the Special Meeting, Vical urges you to vote by proxy to ensure your vote is counted. You may still attend the Special Meeting and vote in person if you have already voted by proxy. As a stockholder of record:

If you vote by proxy, your vote must be received by 11:59 p.m. Eastern Time on [●], 2019 to be counted.

If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the NYSE deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Proposal No. 2 (approval of the consummation of a change of control of Vical resulting from the Contemplated Transactions pursuant to the Nasdaq rules) is a non-routine matter, and accordingly your broker or nominee may not vote your shares on such proposals without your instructions. Proposal No. 1 (approval of the Reverse Split) and Proposal No. 3 (approval of the adjournment of the Special Meeting, if necessary) are considered routine matters and accordingly your broker or nominee may vote your shares on such proposals in the absence of your instructions.

All properly executed proxies that are not revoked will be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting in accordance with the instructions contained in the proxy. If a holder of Vical common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” Proposal No. 1 to approve the amendment to the restated certificate of incorporation, as amended, of Vical to effect the Reverse Split; FOR” Proposal No. 2 to approve the consummation of a change of control of Vical resulting from the Merger pursuant to the Nasdaq rules, as contemplated by the Merger Agreement; and “FOR” Proposal No. 3 to adjourn the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 and 2 in accordance with the recommendation of the Vical board of directors.

Vical stockholders of record may change their vote at any time before their proxy is voted at the Special Meeting in one of three ways. First, a stockholder of record of Vical can send a written notice to the Corporate Secretary of Vical stating that the stockholder would like to revoke its proxy. Second, a stockholder of record of Vical can submit new proxy instructions either on a new proxy card or via the Internet. Third, a stockholder of

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record of Vical can attend the Special Meeting and vote in person. Attendance alone will not revoke a proxy. If a Vical stockholder of record or a stockholder who owns Vical shares in “street name” has instructed a broker to vote its shares of Vical common stock, the stockholder must follow directions received from its broker to change those instructions.

Required Vote

Approval of Proposal No. 1 requires the affirmative vote of the holders of a majority of the outstanding shares of Vical’s common stock outstanding as of the record date for the Special Meeting, assuming a quorum is present. Abstentions and broker non-votes will have the effect of a “NO” vote for Proposal No. 1. It is anticipated that Proposal No. 1 will be a discretionary proposal considered routine under the rules of the NYSE.

Approval of Proposal No. 2 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Special Meeting, assuming a quorum is present. Abstentions and broker non-votes will be not be considered votes cast and will have no effect on the vote for Proposal No. 2. It is anticipated that Proposal No. 2 will be a non-discretionary proposal considered non-routine under the rules of the NYSE (i.e., if you do not give your broker instructions, your Vical shares will be treated as broker non-votes).

Approval of Proposal No. 3 requires the affirmative vote of a majority of the votes present in person or by proxy at the Special Meeting and entitled to vote. Abstentions and broker non-votes will be considered votes cast and have the effect of a “NO” vote for Proposal No. 3. It is anticipated that Proposal No. 3 will be a discretionary proposal considered routine under the rules of the NYSE.

Solicitation of Proxies

In addition to solicitation by mail, the directors, officers, employees and agents of Vical may solicit proxies from Vical stockholders by personal interview, telephone, telegram or otherwise. Alliance Advisors has been engaged to assist Vical with its stockholder engagement process, and Vical may pay Alliance Advisors an estimated fee of $10,000, plus reasonable out-of-pocket expenses, in connection with the solicitation. Vical will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

Other Matters

As of the date of this proxy statement, Vical’s board of directors does not know of any business to be presented at the Special Meeting other than as set forth in the notice accompanying this proxy statement. If any other matters should properly come before the Special Meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

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THE MERGER

This section and the section titled “The Merger Agreement” in this proxy statement describe the material aspects of the Merger, including the Merger Agreement. While Vical and Brickell believe that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement attached as Appendix A, the opinion of MTS Securities attached as Appendix B, and the other documents to which you are referred herein. See the section titled “Where You Can Find More Information” in this proxy statement.

Background of the Merger

Vical’s board of directors and management regularly review Vical’s operating and strategic plans, both near-term and long-term, as well as potential strategic options in an effort to enhance stockholder value. These reviews and discussions focus, among other things, on the opportunities and risks associated with Vical’s business and financial condition and strategic relationships and other strategic options.

On January 22, 2018, we and Astellas Pharma, Inc. (“Astellas”) announced that ASP0113, an investigational DNA vaccine being developed for cytomegalovirus-seropositive hematopoietic stem cell transplant recipients, did not meet its primary and secondary endpoints in the Phase 3 HELIOS clinical trial.

On January 30, 2018, we announced that we were undertaking a restructuring in order to conserve capital and focus our efforts on VL-2397, our antifungal drug product candidate that was then entering a pivotal Phase 2 clinical trial, and on completing the Phase 2 study of our bivalent vaccine candidate for herpes simplex virus type 2 (“HSV-2”). The restructuring included a reduction in staff of 54% and the termination of all activities related to the ASP0113 program licensed to Astellas.

On February 20, 2018, we announced the initiation of a Phase 2 trial of the VL-2397 novel antifungal compound.

On March 9, 2018, our board of directors held a regular in-person meeting, with representatives of management and Cooley LLP (“Cooley”), outside counsel to Vical, also attending. At this meeting, and in anticipation of the strategic options to be considered following the results of the HSV-2 Phase 2 clinical trial, representatives of MTS were invited to make a presentation on Vical’s strategic alternatives, including a reverse merger, strategic merger, out-licensing of Vical’s assets and remaining as an independent company. MTS was asked to participate in the meeting based upon its experience and our management and board’s prior familiarity with them, which included past, informal advice on potential product and other opportunities.

On June 11, 2018, we announced that the Phase 2 study of our bivalent vaccine candidate for HSV-2 did not meet its primary endpoint of annualized lesion recurrence rate calculated based on those genital recurrences that were both clinically and virologically confirmed during a minimum of nine months of surveillance, and that as a result, we were terminating the HSV-2 program.

On June 18, 2018, our board held a regular in-person meeting, with representatives of management and Cooley attending, at which it considered potential strategic options, including a reverse merger, strategic merger and remaining as an independent company. At this meeting, our board approved the formation of a strategy committee comprised of Richard M. Beleson, Gary A. Lyons and George J. Morrow to assist Vical management in the strategic review. Our board also authorized Vical management to finalize and execute an engagement letter with MTS to act as a financial advisor in connection with the strategic review process. MTS was selected based upon our management and board’s familiarity with them, among other things, its knowledge and experience as a transaction advisor for mergers and acquisitions in the biopharmaceutical industry.

On July 16, 2018, we entered into an engagement letter with MTS.

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On July 19, 2018, we issued a press release announcing that our board planned to explore a range of strategic options to enhance stockholder value, and that it had retained MTS as its financial advisor to assist in the strategic review process.

Following the initiation of the strategic review, from a universe of approximately 500 companies, Vical management and MTS developed a list of more than 50 life sciences companies that were targeted for proactive outreach. Vical management and MTS focused on candidates with certain characteristics, including therapeutic area, caliber of management, science, differentiated drug pipelines and meaningful catalysts to achieve value appreciation within 12 to 24 months using Vical’s cash contribution, in addition to the counterparty’s own cash, without requiring further significant post-transaction dilution to Vical’s stockholders. While not a requirement, we also gave preference in our assessment to any counterparty that planned to continue development of our VL-2397 program following the transaction (the foregoing two sentences, the “Determination Criteria”). The list was reviewed and approved by the strategy committee.

Following the July 19, 2018 press release through August 2018, MTS and Vical management began reaching out to potential counterparties. Of the more than 70 private and public companies contacted in 2018 by MTS and Vical management during this outreach process in 2018 (including in response to inbound inquiries), 14 companies were selected to receive process letters, including Company A and Company B, private companies, and Company D, a public company, based on the Determination Criteria, with process letters being sent starting on August 21, 2018. The majority of process letters set a deadline of September 14, 2018 for the submission of proposals, though some parties who expressed interest later in the process received process letters with later submission deadlines. Of these 14 companies, six declined to submit a proposal. The remaining eight companies, plus two companies that did not receive process letters—Company C (a public company) and one other public company—submitted proposals. Of these 10 companies, nine executed confidentiality agreements and all 10 submitted formal proposals, which were then narrowed down to three companies following deliberation based on the Determination Criteria, and further due diligence, including scientific due diligence. All of the confidentiality agreements executed in this phase of the process, including those with Company A, Company B, Company C and Company D, included a standstill provision that did not have a fall-away provision but permitted the counterparty to privately and confidentially approach our management during the standstill period.

On August 7, 2018, representatives of MTS reached out to Company D, a public company identified by MTS as a target for outreach, to provide an overview of the process. On August 16, 2018, we entered into a confidentiality agreement with Company D. On August 22, 2018, MTS sent Company D a process letter, following which representatives of Company D and Vical held an initial update call on September 12, 2018 and Company D was granted access to the Vical dataroom on September 14, 2018. On September 27, 2018, a representative of Company D sent an email communication to MTS indicating that they would not be submitting an offer for Vical because they were not interested in the VL-2397 program.

On August 9, 2018, we entered into a confidentiality agreement (which contained a standstill) with Company B, a private company interested in a reverse merger transaction with which Vical management had, prior to launching the strategic review process, discussed potential complementarity between the two companies.

On that same day, Company A, a private company interested in a reverse merger transaction with which Vical management had had preliminary discussions, sent MTS a preliminary, non-binding indication of interest that reflected a 60% and 40% ownership split for Company A and Vical stockholders in the post-closing company, assuming a Vical net cash balance of $40 million.

On August 15, 2018, we entered into a confidentiality agreement (which contained a standstill) with Company A.

From August 16, 2018 through March 25, 2019, the strategy committee met frequently with Vical management to discuss the status of the strategic review process.

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On August 22, 2018, we granted Company B access to our dataroom.

On August 29, 2018, we granted Company A access to our dataroom.

On September 10, 2018, Company A submitted an updated preliminary non-binding indication of interest for a reverse merger transaction with Vical, which was consistent with its August 9, 2018 offer, including with respect to the equity split, but updated the projected Company A net cash balance.

On September 11, 2018, our board held a regular in-person meeting, with representatives of management, MTS and Cooley attending, to review the status of the strategic process, the proposal made by Company A and the potential counterparties remaining in the process, including Company A and Company B. At the meeting, a representative of Cooley reviewed the fiduciary duties of the board in the context of a strategic process.

On September 14, 2018, Company B submitted a non-binding offer for a reverse merger transaction with Vical. The proposal reflected a 62.5% and 37.5% ownership split for Company B and Vical stockholders in the post-closing company (using the treasury stock method (“TSM”)), subject to a net cash adjustment.

On October 24, 2018, MTS provided Vical’s written response to Company B’s initial proposal, which, among other things, countered with 55% and 45% ownership split for Company B and Vical stockholders in the post-closing company (using TSM), without any exchange ratio adjustment for net cash (but subject to delivery of a minimum cash balance of approximately $40 million, depending on the timing of closing), as well as the issuance of a contingent value right (“CVR”) to Vical’s stockholders with respect to a pipeline product.

On October 25, 2018, MTS provided Vical’s written response to Company A’s initial proposal, which, among other things, countered with 55% and 45% ownership split for Company A and Vical stockholders in the post-closing company (using TSM), subject to minimum Vical closing net cash balance at closing estimated to be $40 million, as well as either the issuance of a CVR or an upward adjustment in the equity split for Vical stockholders for any upfront or milestone payments with respect to any Vical partnering transactions with respect to a pipeline product.

On October 30, 2018, our board met in person with representatives of Company A and Company B to discuss each party’s business and proposal. Later that same day, with representatives of Cooley attending, the board discussed the status of negotiations with Company A and Company B. Management presented an overview of each potential counterparty’s business and an initial scientific due diligence assessment, as well an analysis of a scenario where Vical completed its Phase 2 clinical trial of VL-2397 as a standalone company.

On October 30, 2018, we also entered into a confidentiality agreement (which contained a standstill) with Company C, a public company that was introduced to Vical by a representative of a Vical stockholder who was also a representative of a significant stockholder of Company C.

On October 30, 2018, we also received a counter-proposal from Company A, which, among other things, accepted Vical’s proposed ownership split, accepted Vical’s proposal on Vical net cash and a CVR or equity split adjustment to Vical stockholders for milestone and upfront payments to the extent that partnering transactions with respect to a pipeline product are entered into prior to closing.

In October and November 2018, our management conducted a due diligence review of Company A, Company B and Company C.

On November 1, 2018, Company C submitted a preliminary non-binding proposal to acquire Vical in a stock-for-stock transaction at a purchase price of $1.60 per share or $46.48 million, plus a CVR of $0.20 per share. At the direction of the strategy committee, a representative of Vical management contacted the Vical

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stockholder with a relationship with Company C, who in turn asked Company C to improve its proposal. On November 9, 2018, Company C updated its proposal to increase the purchase price to $1.80 per share, or $52.52 million, plus a CVR of $0.30 per share.

On November 7, 2018, Company B sent a counter-proposal to Vical which, among other things, reflected a 56.8% and 43.2% ownership split for Company B and Vical stockholders in the post-closing company (using TSM) and accepted Vical’s proposal that there be no exchange ratio adjustment for net cash (but subject to delivery of a minimum cash balance of $40 million (assuming no accrual of patients in the VL-2397 Phase 2 clinical trial)) and the issuance of a CVR to Vical stockholders.

On November 8, 2018, Company A sent a further revised counter-proposal to Vical, which proposed a 50% and 50% ownership split for Company A and Vical stockholders in the post-closing company (using TSM).

On November 28, 2018, our board held a special telephonic meeting, with representatives of management, MTS and Cooley attending, to discuss the strategic review process and Vical’s strategic options, including the status of discussions with Company A, Company B and Company C, as well as a potential liquidation scenario. Management provided a report on its assessment of the results of scientific due diligence on the companies remaining in the process. Management recommended that Vical not continue discussions with Company A because of issues identified in scientific due diligence, which in the board’s judgment did not justify its valuation, and concerns regarding the Company A management team. Vical management also recommended prioritizing the opportunity with Company C over Company B because of the strength of Company C’s pipeline, possibility of liquidity provided by Company C stock, and management’s assessment of the strengths of each company’s management team. The board considered certain risks associated with the stock-for-stock transaction proposed by Company C and directed MTS to continue discussions with Company C and develop a proposal for an exchange ratio collar. In addition, it directed MTS and Vical management to continue due diligence and discussions with Company B as a second option.

On December 4, 2018, MTS delivered Vical’s counter-proposal to Company C that reflected, among other things, a floating exchange ratio subject to a collar for a minimum and maximum Vical stockholder pro forma ownership of the combined company of 20% and 30%.

On December 4, 2018, Company C delivered its response to the Vical counter-proposal, which reflected a Vical stockholder ownership floor of 15% of the post-closing company, and a Vical net working capital purchase price adjustment based on a $40 million target. That same day, we granted Company C access to our dataroom. On December 5, 2018, representatives of MTS and Vical had a conference call with representatives of Company C to discuss how the Vical net working capital calculation and collar would be determined.

On December 6, 2018, Vical’s strategy committee met to discuss the revised terms proposed by Company C and the general status of discussions.

On December 8, 2018, representatives of Company C contacted representatives of MTS to inform them that because of, among other reasons, valuation concerns, volatility of their stock price and concerns about the adequacy of the parties’ net cash, it was not going to move forward with a potential transaction. In light of that development, Vical’s strategy committee directed management to continue to move forward with detailed due diligence and negotiations with Company B.

Our board held a regular in-person meeting on December 13, 2018, with representatives of management, Cooley and MTS attending, where members of management and representatives of MTS provided an update on negotiations with Company B and Company C, as well as ongoing due diligence efforts with respect to Company B. At this meeting, management discussed an analysis of a potential liquidation of Vical that had previously been provided to our board, including the potential timeline for liquidation and an estimate, subject to various assumptions, of the per share amount that would be distributable to Vical stockholders in this scenario.

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Following consideration of Vical’s alternatives, including concerns relating to the adequacy of Company B’s data raised in due diligence, as well as with Company B’s management, the board provided management with guidance regarding further discussions with Company B. At the meeting, a representative of Cooley reviewed the fiduciary duties of the board in the context of a strategic process.

On December 14, 2018, representatives of MTS sent a draft merger agreement to Company B and identified specific issues, from the Vical board, to be resolved prior to finalizing a transaction including the need to address concerns about Company B’s management team.

On January 17, 2019, a representative of the investment bank that had been engaged by Company B contacted MTS to inform them that they were withdrawing from the process because of, among other reasons, concerns about the adequacy of Vical’s net cash levels.

On January 28, 2019, representatives of Brickell communicated with MTS to inquire about the status of the process. From January 28-31, 2019, there was a series of communications to provide MTS and Vical with information on Brickell new management hires and Brickell’s current financing process with various parties.

On January 29, 2019, our board held a special telephonic meeting, with representatives of management, Cooley and MTS attending, where members of management and representatives of MTS provided an update on the strategic process and Vical’s strategic options, including liquidation of the company, as previously presented to the board. In addition, the board discussed the status of the VL-2397 Phase 2 clinical trial, including patient accrual rates, and Vical’s cash burn and cash position. The board directed management to explore a potential sub-license or other transaction related to the disposition of the VL-2397 program and to otherwise prepare to cease further development of VL-2397 in light of the low patient accrual rates in the study.

Following the January 29, 2019 board meeting, MTS continued reaching out to potential counterparties for a second round of the strategic review process. Of the 39 private and public companies that were targets of outreach during the second phase of the process (including in response to inbound inquiries), and based on the Determination Criteria (other than the counterparties’ willingness to continue the VL-2397 program), Vical management selected 10 companies, including Brickell and Company D, to receive process letters starting on February 11, 2019. The majority of the process letters set a deadline of February 25, 2019 for submission of a proposal, though some parties who expressed interest later received process letters with later submission deadlines. Nine of the 10 companies that received process letters submitted a formal proposal, along with one additional company that made an inbound inquiry and did not receive a process letter. Of those remaining 10 companies that submitted formal proposals, nine executed confidentiality agreements. All of the confidentiality agreements executed with parties active in this phase of the process, including by Company D and Brickell, included a standstill provision but permitted the counterparty to privately and confidentially approach our management during the standstill period. Three of the nine confidentiality agreements with parties other than Company D and Brickell had fall-away provisions.

On February 1, 2019, representatives of MTS and Brickell had a call to discuss strategic process overview and timing.

On February 4, 2019, Vical entered into a confidentiality agreement (which contained a standstill and was dated to be effective as of January 31, 2019) with Brickell and granted Brickell dataroom access. On February 5, 2019, Vical received access to Brickell’s dataroom.

On February 11, 2019, Brickell made a management presentation to Vical. That same day, MTS sent a process letter to Brickell.

On February 12, 2019, representatives of MTS and Brickell held a call to discuss timing, key issues and key considerations for a proposal.

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On February 18, 2019, the Vical board held a special telephonic meeting, with representatives of management, MTS and Cooley attending. At this meeting MTS provided an update on the strategic review process, including the current opportunities, the status of discussions with potential counterparties and strategies for soliciting additional proposals. Our board discussed the relative merits of the opportunities under consideration with Brickell and three other private companies, which management presented to the board as its highest priority opportunities based on the Determination Criteria (other than the counterparties’ willingness to continue the VL-2397 program), as well as opportunities with two public companies and one other private company. The board also discussed a potential liquidation of the company, as previously presented to the board. The board directed Vical management to continue pursuing potential transactions that would generate maximum value for the company’s stockholders and to present such proposals at the next scheduled board meeting. The board also directed management to discontinue clinical development of VL-2397, because of low patient accrual rates in the study, and to implement further cost reduction measures.

On February 19, 2019, we announced that we had decided to discontinue our Phase 2 clinical trial of VL-2397 because of low patient accrual rates in the study and in order to conserve our cash resources while we pursued the strategic alternative review process.

Both prior to and following the termination of the VL-2397 program, our management pursued a number of potential out-licensing transactions with respect to the VL-2397 assets but none of the potential counterparties expressed any meaningful interest in the asset.

On February 21, 2019, representatives of Company D contacted MTS to inquire about the status of the strategic review process. Representatives of MTS had an update call with Company D on February 22, 2019.

On February 25, 2019, Brickell submitted a preliminary non-binding indication of interest concerning a reverse merger transaction with Vical. The proposal reflected a 60% and 40% ownership split for Brickell and Vical stockholders in the post-closing company based on a $100 million pro forma valuation, a seven-member post-closing board of directors (with two Vical directors) and a minimum Vical net cash balance of $35 million at closing, and it also summarized the terms of a proposed concurrent financing with an affiliate of NovaQuest Capital Management (“NovaQuest”) for $25 million of non-dilutive at-risk product financing and $5 million in equity. Brickell’s belief was that the funding from NovaQuest, along with Vical net cash, would provide sufficient financial resources, through the fourth quarter of 2020 to allow the combined company to focus on the development and potential commercialization of its sofpironium bromide program for the treatment of axillary hyperhidrosis.

On March 4, 2019, the Vical strategy committee discussed the Brickell proposal with representatives of MTS. Following this discussion, MTS contacted Brickell to indicate that Brickell was going to advance in the process and to counter with a 56.4% and 43.6% ownership split for Brickell and Vical stockholders in the post-closing company (on a TSM basis).

On March 5, 2019, MTS sent an illustrative pro forma capitalization table to Brickell and the parties followed up with a call to discuss the proposed valuation splits.

On March 6, 2019, Brickell sent MTS its executed term sheet with NovaQuest to address the Vical management teams’ need for a high level of certainty with respect to Brickell’s post-transaction financial resources, which was consistent with the terms summarized in Brickell’s indication of interest, as well as the pivotal Phase 3 results for sofpironium bromide reported by Brickell’s development partner, Kaken, in Japan. In that same communication, Brickell rejected the ownership split that Vical had previously proposed and reacted to its previously proposed equity split.

On March 7, 2019, Company D submitted a written non-binding proposal to acquire Vical for Company D publicly traded shares valued at approximately $35 million. Following receipt of the proposal, representatives of

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MTS and Company D discussed the methodology used to determine the valuation of the Company D share consideration.

On March 8, 2019, our board held a regular in-person meeting, with representatives of management and MTS attending, to review the 10 proposals submitted in response to the second outreach effort. At the meeting, management presented its assessment of the potential opportunities, classifying proposals by Company D, Brickell, two other public companies and three other private companies as prioritized opportunities based on the Determination Criteria (other than the counterparties’ willingness to continue the VL-2397 program). Management also presented its analysis of the prioritized opportunities based on factors including deal quality, cash at closing, management team quality, science and data quality, regulatory path and market potential. Based on these criteria, management recommended continuing the process with Company D, Brickell and one other public company. After further discussion of the opportunities in light of the Determination Criteria, the board directed management to continue discussions with Company D and Brickell and to disengage the other companies identified as prioritized opportunities.

Following the board meeting, representatives of MTS contacted Company D to propose a purchase price of the greater of $35 million of Company D shares or a number of Company D shares representing a specified minimum percentage of the post-closing company. Representatives of MTS also held a call with Brickell to convey that Brickell was a finalist subject to several key conditions, including entering into a definitive agreement for a concurrent financing with NovaQuest (the “Concurrent Financing”) at signing on terms reasonably satisfactory to Vical.

On March 12, 2019, representatives of Brickell met with our board of directors to present an overview of the company, respond to questions and discuss the current proposal.

On March 16, 2019, MTS sent a draft form of merger agreement to Brickell. The draft did not include an exchange ratio adjustment for net cash, but did include a closing condition for minimum Vical net cash in an amount to be determined.

On March 18, 2019, representatives of Company D held a call with our board to present an overview of the company, respond to questions and discuss the current proposal. That same day Vical re-opened its dataroom to Company D.

On March 19, 2019, representatives of Brickell held a call with our management team to discuss financial due diligence matters.

On March 20, 2019, Company D sent MTS a counter-proposal that increased the Vical valuation to $40 million, payable in Company D stock, and proposed a collar of plus or minus 25% of the price per share as of the signing date.

On March 25, 2019, representatives of Brickell circulated a revised draft of the merger agreement to MTS. The draft proposed an exchange ratio adjustment for each party’s net cash and a minimum Vical net cash closing condition (and corresponding Brickell termination right) of $30 million.

On March 27, 2019, Cooley and Mayer Brown LLP (“Mayer Brown”), outside counsel to Brickell, held a call to discuss Cooley’s initial questions on the revised draft of the merger agreement. That same day, members of Vical management met with representatives of Brickell to discuss the status of the transaction and Vical’s pending due diligence inquiries.

On March 29, 2019, Company D sent MTS a further updated proposal, which provided for a purchase price of $40 million above a certain share price and $35 million below a certain share price, with each party having termination right if the share price fell below a certain threshold.

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On April 2, 2019, Company D held a due diligence call and MTS submitted a request for additional financial information. Following discussion of the share price threshold at which the parties would have the right to terminate, Company D followed up with MTS to propose a revised threshold for a termination right if the share price fell below a certain threshold. That same day, representatives of Vical, MTS and Brickell held a call to discuss Brickell’s cash flow and balance sheet.

On April 3, 2019, Cooley circulated a revised draft of the merger agreement to Mayer Brown. The draft noted Vical’s expectation that the Concurrent Financing would be committed at signing and proposed an exchange ratio adjustment and mutual closing conditions based on minimum levels of net cash.

On April 4, 2019, representatives of MTS, Vical and NovaQuest held a call to discuss the terms of the proposed Concurrent Financing and respond to due diligence questions.

On April 8, 2019, MTS sent a counter-proposal to Company D, which added a 10% ownership floor for Vical stockholders in the post-closing company and proposed that there should be a linear increase in Vical stockholder implied equity value in the case of a Company D closing share price drop relative to the reference share price at signing. Company D rejected the proposed ownership floor but accepted the linear equity value gradient proposal.

On April 9, 2019, Mayer Brown circulated a revised draft of the merger agreement to Cooley and conveyed Brickell’s request to enter into exclusivity with Vical in order to finalize the transaction documents.

On April 10, 2019, MTS sent a form of merger agreement to Company D.

On April 11, 2019, Company D sent a draft exclusivity letter to MTS.

On April 15, 2019, our board held a special telephonic meeting, with representatives of management, MTS and Cooley attending, to review the status of discussions with Brickell and Company D and update the board on the terms proposed by each party. Management reviewed preliminary due diligence results and the strengths and weaknesses of Brickell and Company D. The board discussed an upcoming regulatory milestone of Company D and management’s recommended approach to moving forward with the strategic process depending on this regulatory outcome. It also discussed the anticipated timing for finalizing the Concurrent Financing for Brickell relative to the timing of certain regulatory matters with respect to Company D. Following discussion, our board directed management to defer the decision on whether to enter into exclusivity with either counterparty until further clarity was gained regarding the regulatory matters.

On April 17, 2019, Company D sent an updated exclusivity letter and a draft form of merger agreement to MTS.

On April 26, 2019, representatives of MTS, Vical management and Company D held a call to clarify certain terms in the merger agreement, including termination rights associated with Company D’s stock price and Vical stockholder ownership thresholds in the post-closing company. That same day MTS sent a revised draft of the exclusivity letter to Company D and a markup of Company D’s indication of interest.

On May 1, 2019, representatives of Vical, Company D and MTS held a call to discuss certain regulatory developments at Company D.

On May 3, 2019, our board of directors held a special telephonic meeting, with representatives of management, Cooley and MTS attending, to review the impact of certain negative regulatory developments at Company D on the strategic review process. Management reviewed the status of negotiations with Brickell, including updates on transaction terms, the status of Brickell’s Concurrent Financing and key items to be completed in order to finalize a transaction. The board discussed Vical’s options, including moving forward with

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Brickell or liquidating the company, as previously presented to the board. In view of the negative regulatory outcome and resulting decline in Company D’s stock price, the board directed management to end discussions with Company D and enter into a 15-day exclusivity period with Brickell. The board also discussed the other companies that were still in the process and determined that they were not viable candidates based upon the Determination Criteria. That same day, representatives of MTS sent Brickell a draft exclusivity agreement.

On May 6, 2019, we executed an exclusivity agreement with Brickell, which provided for an exclusivity period through the end of May 22, 2019.

On May 7, 2019, MTS sent Brickell an updated pro forma capitalization table. That same day representatives of Cooley, Mayer Brown, Brickell and Vical held a call to discuss the treatment of various Brickell securities in calculating the Exchange Ratio.

On May 9, 2019, Cooley circulated a revised draft of the merger agreement to Mayer Brown.

On May 10, 2019, Brickell sent MTS the then-current draft of the Funding Agreement with respect to the Concurrent Financing, together with a summary of transaction terms, which added the issuance of the NovaQuest Warrants and removed the $5 million of preferred equity financing that was included in the NovaQuest initial term sheet.

On May 13, 2019, Brickell sent MTS a draft of the form of NovaQuest Warrants.

On May 14, 2019, representatives of Vical, MTS and Brickell had a call to discuss the terms of the Funding Agreement and NovaQuest Warrants.

On May 15, 2019, Mayer Brown sent a revised draft of the merger agreement to Cooley, which, among other things, proposed a closing condition for minimum Brickell net working capital and proposed a termination fee in certain circumstances of $1.5 million. That same day Mayer Brown and Cooley held a call to discuss treatment of Brickell equity awards in the transaction.

On May 19, 2019, representatives of Brickell circulated a revised draft of the Funding Agreement to Vical and Cooley. That same day, Cooley sent a revised draft of the merger agreement to Mayer Brown, which proposed a closing condition for a higher minimum Brickell net working capital. The draft also added Vical termination rights and a $1 million reverse termination fee payable to Vical in the event that the Concurrent Financing failed to close. The exchange ratio calculation was modified in the draft to include the recently proposed NovaQuest Warrants in the fully-diluted Brickell outstanding share count despite being proposed to be issued by Vical following the transaction.

On May 20, 2019, Mayer Brown sent a revised draft of the merger agreement to Cooley. Representatives of Cooley, Mayer Brown, Vical and Brickell held a call to discuss feedback on the draft Funding Agreement and NovaQuest Warrants. Later that day, Cooley circulated a revised draft of the merger agreement to Mayer Brown.

Between May 21, 2019 and June 2, 2019, Cooley and Mayer Brown exchanged drafts of the merger agreement, disclosure schedules to the merger agreement, support agreement, lock-up agreement and the Funding Agreement, and participated in calls to discuss the terms thereof. Among other provisions, the parties negotiated the inputs to the calculation of the Exchange Ratio (including the treatment of securities issued in the pre-closing period and the NovaQuest Warrants), the definition of Vical net cash, Brickell net working capital as well as the terms (including with respect to deal certainty) of the Funding Agreement. Brickell, based on further review of its commitments and in light of agreed upon changes to the definition of net working capital, which expanded the definition of included liabilities, requested a further reduction in the net working capital number for the purposes of the closing condition, and the parties ultimately agreed upon a net working capital closing condition.

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On June 2, 2019, at a special telephonic meeting with representatives of management, Cooley and MTS attending, our board in consultation with our management and representatives of MTS and Cooley reviewed the strategic process and Brickell’s proposal. At the meeting, representatives of MTS confirmed that MTS had not had any prior relationship with, or provided any services, to Brickell during the last two years. At this meeting, representatives of MTS also reviewed its financial analyses of the relative valuation of Vical and Brickell in the merger. Following discussion, MTS Securities provided an oral opinion (which was subsequently confirmed in writing as of June 2, 2019), as of the date of the MTS Opinion and subject to the various assumptions and limitations set forth therein the Exchange Ratio was fair, from a financial point of view, to the holders of Vical common stock. Also, at this meeting, representatives of MTS reviewed changes in the proposed terms of the merger agreement from those discussed at the May 3, 2019 board meeting, including the treatment of options and other Brickell securities issued during the pre-closing period in the Exchange Ratio, the terms of the Funding Agreement with NovaQuest and the closing condition for Brickell’s minimum level of net working capital at closing. Cooley reviewed the fiduciary duties of the board in the context of a strategic process and the merger agreement terms, including determination of the Exchange Ratio, conditions to closing, termination rights and fees associated with terminations under certain circumstances, and our limited right to continue negotiations with other interested parties. Our board engaged in extensive discussions relating to Brickell and the terms of the proposed transaction.

Following consideration of the Merger Agreement and the Contemplated Transactions, including consideration of the factors described below in the section titled “The Merger—Reasons for the Merger,” our board unanimously (a) determined that the Contemplated Transactions were fair to, advisable and in the best interests of Vical and its stockholders; (b) approved and declared advisable the merger agreement and the Contemplated Transactions, including the issuance of shares of Vical’s common stock to the shareholders of Brickell pursuant to the terms of the Merger Agreement; and (c) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of Vical vote to approve the Closing Stockholders Matters. Our board of directors also agreed to determine the final Vical board members and reverse stock split ratio at a later date.

Later that evening, representatives of Brickell, Vical and Merger Sub executed the definitive Merger Agreement. Concurrently with the execution of the Merger Agreement, each of the directors and executive officers of Brickell holding Brickell capital stock, as well as Brickell stockholders representing approximately 75% of Brickell’s outstanding common stock (on an as converted basis) as of such date entered into the support agreement and the lock-up agreement. That same day, Brickell entered into the Funding Agreement with NovaQuest.

Execution of the Merger Agreement was publicly announced before the open of markets on June 3, 2019.

On June 24, 2019, the Vical board received a written unsolicited offer from an investment firm and minority stockholder of Vical. The offer included a proposal to form a transaction vehicle to purchase, for cash, 100% of the Vical shares not owned by the bidder at a price of $1 per share. There were few details provided by the bidder, other than the indicated price and a proposal to enter into discussions. The offer did not include an actual funding (or other) commitment or a proposed definitive agreement.

On June 24, 2019, Vical provided Brickell with oral and written notice of the unsolicited offer as required pursuant to the Merger Agreement.

On June 27, 2019, at a special telephonic meeting with representatives of management, Cooley and MTS attending, Vical’s board reviewed and discussed the unsolicited offer. After carefully considering the offer, the Vical board rejected it based on several factors. First, the offer of $1.00 per share was significantly less than the $1.26 per share liquidation value of Vical assuming a liquidation date of July 31, 2019, which in turn was below the range of implied per share values to Vical stockholders in the pro forma combined company with Brickell, as more fully described below under the caption “The Merger—Opinion of MTS Securities, LLC”. Second, and of particular note, the board found that the offer was subject to substantial uncertainty, was inadequate and was not

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a Superior Offer (as defined in the section titled “The Merger Agreement—Non-Solicitation”) when compared to the potential long term value for Vical stockholders associated with the proposed merger with Brickell. Given these factors, the board determined that the proposal did not constitute and could not be reasonably likely to result in a Superior Offer (as defined in the section titled “The Merger Agreement—Non-Solicitation”). Accordingly, and consistent with its obligations under the Merger Agreement, Vical declined the request to enter into discussions with the bidder, and Vical communicated this decision to the bidder. The board continues to unanimously recommend that Vical stockholders vote to approve each of the proposals set forth in this proxy statement.

Reasons for the Merger

Following the Merger, the combined company will be a late clinical-stage company focused on the development and commercialization of differentiated therapeutics for the treatment of skin diseases. In concluding that the Merger is in the best interests of the Vical stockholders, Vical’s board of directors considered and viewed the following factors as supporting its decision to reach its conclusion (i) that the Merger and all related transactions set forth in and contemplated by the Merger Agreement are fair to, advisable and in the best interests of Vical and its stockholders and (ii) to approve and declare advisable the Merger Agreement and the Contemplated Transactions, and to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of Vical vote to approve the Closing Stockholder Matters (as defined in the section titled “The Merger Agreement—Vical Special Meeting”):

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The Vical board of directors also reviewed the recent financial condition and results of operations of Vical, including:

The Vical board of directors also reviewed the terms of the Merger and associated transactions, including:

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In the course of its deliberations, Vical’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger, including:

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The foregoing information and factors considered by the Vical board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by Vical’s board of directors. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the Vical board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of Vical’s board of directors may have given different weight to different factors. Vical’s board of directors conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, the Vical management team and the legal and financial advisors of Vical, and considered the factors overall to be favorable to, and to support, its determination.

Certain Vical Management Unaudited Prospective Financial Information

As a matter of course, Vical does not publicly disclose long-term projections of future financial results due to the inherent unpredictability and subjectivity of underlying assumptions and estimates. However, in connection with its evaluation of the Merger, the Vical board of directors considered certain unaudited, non-public financial projections with respect to Brickell as developed by Vical management, based on discussions with and materials provided by Brickell to Vical management on March 11, 2019 and March 14, 2019, industry metrics, product launches of products deemed similar to sofpironium bromide, and Vical management’s judgement, for each of the calendar years ending December 31, 2019 through 2034, which we refer to as the Vical management Brickell projections. The Vical management Brickell projections were provided to Vical’s financial advisor. A summary of the Vical management Brickell projections is set forth below.

The inclusion of the Vical management Brickell projections should not be deemed an admission or representation by Vical, its financial advisor or any of their respective officers, directors, affiliates, advisors, or other representatives with respect to such projections. The Vical management Brickell projections are not included to influence your views on the Merger but solely to provide stockholders access to certain non-public information prepared by Vical management that was provided to the Vical board of directors in connection with its evaluation of the Merger and to Vical’s financial advisor to assist with its financial analyses as described in the section titled “The Merger—Opinion of MTS Securities, LLC” The information from the Vical management Brickell projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Vical and Brickell in this proxy statement.

The unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or GAAP. Neither the independent registered public accounting firm of Vical, Brickell nor any other independent accountant has audited, reviewed, compiled, examined or performed any procedures with respect to the accompanying unaudited prospective financial information for the purpose of its inclusion herein, and accordingly, neither the independent registered public accounting firm of Vical, Brickell, nor any other independent accountant expresses an opinion or provides any form of assurance with respect thereto for the purpose of this proxy statement. The report of the independent registered public accounting firm of Vical contained in the Vical 10-K, which is incorporated by reference into this proxy statement and relates to the historical financial information of Vical.

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The Vical management Brickell projections are prepared solely for internal use and in connection with Vical’s financial advisor’s work and are subjective in many respects. As a result, these Vical management Brickell projections are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Although Vical believes its assumptions about Brickell to be reasonable, all financial projections are inherently uncertain, and Vical expects that differences will exist between actual and projected results. Although presented with numerical specificity, the Vical management Brickell projections reflect numerous variables, estimates, and assumptions made by Vical’s management at the time they were prepared, and also reflect general business, economic, market, and financial conditions and other matters, all of which are difficult to predict and many of which are beyond Vical’s control. In addition, the Vical management Brickell projections cover multiple years, and this information by its nature becomes subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the estimates and assumptions made in preparing the Vical management Brickell projections will prove accurate or that any of the Vical management Brickell projections will be realized.

The Vical management Brickell projections included certain assumptions relating to, among others things, Vical’s expectations, which may not prove to be accurate, based on information provided by Brickell relating to the axillary hyperhidrosis market in the United States and Japan and projected sofpironium bromide market share; expectations relating the timing of product launch, revenues and cost of goods sold; and expectations relating to operating expenses, working capital and capital expenditures. Vical derived net revenue for the United States based on: (i) the estimated market for axillary hyperhidrosis, which estimate were provided by Brickell through 2025 and extrapolated by Vical from 2026 to 2034, (ii) the estimated market share for sofpironium bromide, which was estimated by Vical by implying a peak market share for sofpironium bromide based on projections provided by Brickell and applying industry estimates and Vical management’s judgment for the launch curve to reach that peak market share, (iii) gross pricing assumptions, based on information provided by Brickell, adjusted for an estimated product launch in 2022 (as to which there can be no assurance), and (iv) gross-to-net sales assumptions, based on information provided by Brickell and adjusted by Vical from a conservative perspective. Vical estimated research and development expenditures prior to commercial launch based on projections provided by Brickell, adjusted for Vical’s expectations of timing for trial initiation and completion. Vical projected sales and marketing expenditures using on an estimated sales force size, based on information from Brickell management, and product launches of products deemed similar to sofpironium bromide, and applying industry estimates and Vical management’s judgment for sales representative costs and marketing expenditures. Vical projected general and administrative costs, assuming a substantial increase in expense leading up to commercial launch and then steady-state growth thereafter. Additionally, as appropriate, Vical incorporated the terms of existing licensing agreements and the Concurrent Financing. Working capital was projected based on industry metrics and Vical management’s judgment, adjusted as appropriate for the timing impacts of existing licensing agreements and the Concurrent Financing. Vical derived net revenue for Japan based upon a 90% cumulative probability of success with respect to the sofpironium bromide milestone and royalty payments in Japan that were provided by Brickell management for each of the calendar years ending December 31, 2019 through 2033 and extrapolated by Vical management for the calendar year ending December 31, 2034.

The Vical management Brickell projections are subject to many risks and uncertainties and you are urged to review the section titled “Risk Factors” beginning on page 25 of this proxy statement for a description of risk factors relating to the merger and Brickell’s business. You should also read the section titled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 59 of this proxy statement for additional information regarding the risks inherent in forward-looking information such as the Vical management Brickell projections. Vical management Brickell projections that were derived or extrapolated from projections provided by Brickell’s management were not reviewed or passed upon by Brickell management, its board of directors or its advisors.

The inclusion of the Vical management Brickell projections herein should not be regarded as an indication that Vical, its financial advisor or any of their respective affiliates or representatives considered or consider the

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Vical management Brickell projections to be necessarily indicative of actual future events, and the Vical management Brickell projections should not be relied upon as such. The Vical management Brickell projections do not take into account any circumstances or events occurring after the date they were prepared. Vical does not intend to, and disclaims any obligation to, update, correct, or otherwise revise the Vical management Brickell projections to reflect circumstances existing or arising after the date the Vical management Brickell projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions or other information underlying the Vical management Brickell projections are shown to be in error. Furthermore, the Vical management Brickell projections do not take into account the effect of any failure of the merger to be consummated and should not be viewed as accurate or continuing in that context.

The Vical management Brickell projections set forth below include Vical management calculated Brickell unlevered free cash flow, which is a non-GAAP measure. Due to the forward-looking nature of the Vical management Brickell projections, specific quantifications of the amounts that would be required to reconcile such projections to GAAP measures are not available. Vical believes that there is a degree of volatility with respect to certain GAAP measures, and certain adjustments made to arrive at the relevant non-GAAP measures, which preclude Vical from providing accurate forecasted non-GAAP reconciliations. The statements set forth in this and the foregoing five paragraphs are referred to as “financial projection statements”.

In light of the foregoing factors and the uncertainties inherent in financial projections, stockholders are cautioned not to place undue reliance, if any, on the Vical management Brickell projections.

The following table, which is subject to the financial projection statements above, presents a selected summary of the unadjusted Vical management Brickell projections that were made available to the Vical board of directors and Vical’s financial advisor. As described above, the revenues and expenses in the following projections have been adjusted for an assumption of a cumulative probability of success for sofpironimum bromide of 90% in Japan (as to which there can be no assurance).

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The following table, which is subject to the financial projection statements above, presents a selected summary of the adjusted Vical management Brickell projections that were made available to the Vical board of directors and Vical’s financial advisor. The revenues and expenses in the following projections have been adjusted for an assumption of a cumulative probability of success for sofpironimum bromide of 70% in the United States (as to which there can be no assurance) and, as described above, 90% in Japan (as to which there can be no assurance).