Agenus Inc (AGEN) 2002 Q2 法說會逐字稿

Good morning, my name is [Semica] and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Antigenics Second Quarter Financial results Conference Call. All lines have been placed on mute to prevent any background noise. After your speaker's remark there will be a question and answer period. If you would like to ask a question during this time then do press star then the number 1 on your telephone keypad. If you would like to withdraw your question press the pound keys. Thank you. Ms. [Medrick] you may begin your conference.

Good morning and welcome to Antigenics Conference Call to discuss our corporate and clinical progress as well as our financial results for the second quarter of 2002. This is Barbara Medrick Manager of Investor Relations and with me today are Garo Armen Chairman and CEO of Antigenics and Dr. Jonathan Lois Chief Medical Officer will update you on the company's clinical progress. In addition, we are joined by Russell Herndon, President and Chief Operating Officer, and Dr. Elma Hawkins, Vice Chairman-in-charge of strategic planning. We hope that all of you have had a chance to review a copy of our earnings press release that went out this morning. We will review the results as well as the highlights of first quarter in this call and then open it up for question. Before I turn the call over to Dr. Garo Armen, I want to remind you that in this call we will make forward-looking statements that may include statements regarding intent to believe our current expectations of the company and its management. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause the company's actual result to differ materially from the results discussed in this statement. Factors that might cause such differences include, but are not limited to the successful development of Antigenics current development stage product, continued success of our commercial products, the uncertainty of strategic alliances, and other risks and uncertainties, details from time to time in the company's filing, with the Securities and Exchange Commission. I will now turn the call over to Dr. Garo Armen.

Thank you, Barbara, I am pleased to provide an update on the company's progress. First I will review the financials for the second quarter and then Dr. Jonathan Lois will provide you the progress in our clinical program and our lead clinical candidates. And then we will open it for questions. For the first three months, for the three months ended rather June 30, 2002 the company incurred a net loss of $14.1 million or 43 cents per share. This compares to a net loss for the same three-month period in 2001 of $8.4 million or 31 cents per share. For the six months ended June 30, 2002, Antigenics incurred a net loss of $26 million or 79 cents per share, which includes a noncash charge of $2.7 million related to depreciation and amortization of assets as well as compensation-related expenses due to stock option grants. This compares with the net loss for the same six months period in 2001 of $16 million or 57 cents per share, which includes the same kind of noncash charge of $2.8 million. Research and development expenses in this period were $18.1 million for the six months ended June 30, 2002, compared to $12.6 million for the same period in 2001. The principal reasons for increased losses reflect the advancement of our clinical trials of Oncophage as well as our other lead product such as Aroplatin and AG-702. Cash and cash equivalents and marketable securities equaled $84.4 million on June 30, 2002 compared to $60.9 million on December 31, of last year. Now let me just briefly summarize some of the progress we have made during the quarter. These are continuing progress that is absolutely essential to get us closer to commercial launch. Number one, we continue to strengthen our management team in the quarter, senior management team as well, as well as our board of directors. Number two, our key programs continue on track and these programs are based on sound signs and very sound clinical data. And number three, we made progress on the commercial development front. Specifically we expanded our recognition among our constituents, physician, and patients. This took place recently at the ASCO meeting, which is the annual cancer meeting that many of you know it is the flagship meeting of the year. We also during the quarter continued to work closely with the FDA to make certain that we meet all the requirements for all aspects of prudent product development. I would like to now turn it to Dr. Johnson Lewis our Chief Medical Officer who will give you the progress on our many clinical programs.

Thank you, Gerald. I will update you on our Oncophage, Aroplatin, and AG-702 programs. I will also talk to you about ASCO and highlight to you the successful symposium that we have sponsored. Let me start with Oncophage and first the renal cell program. We have made substantial progress in both Europe and the U.S. with the phase III randomized trial for the treatment of kidney cancer. We have almost 400 patients to date, 200 of whom and that is about 50 percent have been enrolled since our last earnings call, which was April 23rd. As we have reviewed with you before, if approved, Oncophage will be the very first and only product used in these patients with phase II and III kidney cancer and therefore it will represent a significant advance in the treatment of these patients. Let me move now on to the melanoma program. We have opened enrollment for a multi-center phase III randomized-trial in metastatic melanoma. The first patient was enrolled in May. This trial is now ramping up and represents our second pivotal trial with Oncophage. The trial design was built and our strong phase II data that was presented at ASCO in May, and which is now also been accepted for publication in a major pre-review journal. Similar to renal cancer there is a major unmet need in treating this disease and to that end earlier this year the FDA granted Oncophage, a fast track status in melanoma. As you know the FDA granted fast track status in renal cell carcinoma last October. In addition, on this last Tuesday, we announced that Oncophage used in metastatic melanoma patients has also received orphan status, and this also is the second orphan designation that Oncophage has received. I will now switch gears and update you on Aroplatin. There has been a tremendous amount of excitement around Aroplatin, in particular, in the vicinity of the [ASTRA] meeting in May. This product has an act of metabolites that is near identical to oxaliplatin the data from which generated considerable excitement at ASCO. Aroplatin may have an added advantage over oxalyplatin because of its liposome encapsulation, which may well increase the drugs buyer availability and safety profile. We have initiated a phase II trial with Aroplatin in colon cancer under the direction of [Ganonhoff] at the Arizona Cancer Center. Two additional trials are anticipated to begin this year. Let me shift gears and speak to you about AG 702. As you are aware, we initiated our first study in genital herpes last year. There is no cure for this disease and it is a major problem in the US and other developed countries. This application of heat shock proteins in infectious disease is progressing well and uses a herpes simplex peptide antigen together with recombinant heat shock protein in an off-the-shelf products. This phase I trial is being conducted at the [Phil Haterson] Cancer Center, the preeminent center for herpes clinical trials and is progressing well. The first [indiscernible] group is not complete and the vaccine has thus far shown to be safe. Let me now move on to the ASCO components and antigenic sponsored a satellite symposium at ASCO, which was the first ever on cancer vaccines. This was successful as measured by the considerable turnout and strongly favorable response of the attendees and organizer at ASCO. Almost 400 people attended this meeting. This fairly raised our profile among industry leaders in the oncology field and also showed an increased interest in cancer vaccine. In addition, FES [indiscernible] itself study data were presented. The highlights of which were on melanoma with a favorable response in 14 of 39 patients, and in colorectal cancer with a favorable response in about 50 percent of the 29 patients treated. Let me summarize by saying that this has been a very successful quarter in the clinical development program. We are well on the way with Oncophage and with our clinical heat shock protein infectious disease program. The FDA has designated Oncophage a fast track product for both melanoma and renal cell carcinoma. In addition we now have orphan-status designation for both. We clearly are well on track with our goal of commercialization of Oncophage in 2004. That concludes the clinical development updates. Thank you, [Garel].

Thank you, John let us now open it up for any questions they may have.

At this time I would like to remind everyone in order to ask a question please press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from [Rane Benjamin] from [Needham & Company].

Good morning, congratulation on a very productive quarter. Hey guys there, can you hear me?

Yes.

Great. I would like to just get an update on the milestone, the remaining milestones for this year and also when you believe the enrollment for the melanoma trial will conclude, as also the renal trial.

[]: The milestones for the rest of the year include certainly doing additional trials in Aroplatin. We started one. We have at least one additional trial that will start in the near term. Secondarily we have as we have promised we will start a second pivotal melanoma trial and that should happen by the end of the year. Thirdly, the results are preliminary results of our phase II melanoma trial that is ongoing in Europe will be available. And in addition to that we will most likely advance with our ATRA-IV program in the clinic and advance our pre-clinical program to the point were we can start additional clinical trials within the next 18 to 24 months. In terms of clinical trial enrollment, as you know melanoma just started, we enrolled the very first patient recently. The first several months of any new pivotal trial are slower because it is driven by opening of clinical centers so that you can enroll patients at a fairly hefty pace. We experienced the same thing, for example with our renal cell carcinoma program, but we do expect enrollment for the melanoma trial to be done sometime by the middle of next year and for the renal trial sometime around the same timeframe. We our very pleased as John said with the recent substantial acceleration in enrollment in our phase III clinical trial and that accounts for a good chunk of the increase in expenditures in research and development from last year.

Terrific, thank you very much.

Your next question comes from [Body Lions] from Morgan Kiegan].

Body Lions, [indiscernible]. In the first release it is said that you had enrolled in additional 200 phases in the phase III trial on Oncophage and renal cell for total of almost 400. Is that an expansion of that trial, I thought my understanding was initially that there was can be something around 300 patients.

[]: Okay, the 300 and some odd patients referred to not the enrollment, but the evaluable patients.

Okay.

[]: And the ratio we were running right now is approximately 50 percent of the enrolled patient are evaluable.

[]: Okay. Thanks Garo.

Your next question comes from [Query Cosmos from Ryan Beck].

Hi, good morning guys, few questions for you. First with regards to Oncophage, and you were mentioning of initiating the second pivotal study in melanoma at some point this year. I was wondering if you could provide any additional information with regards to the potential trail design. And then I also have a couple of questions regarding Aroplatin, first one being with the second phase to study that you say you also will initiate at some point in 2002 if that is for pancreatic cancer indication. And then secondly with Aroplatin. As John mentions really no secret that oxaliplatin was one of the highlights at [NASASCO] conference and as the chemical structure of Aroplatin and oxaliplatin is so similar, I was wondering what kind of translation this has led to in terms of awareness amongst the oncology community and that really led to increased excitement over the potential of this drug?

[]: John, I think these are all appropriate questions for you to answer.

Thank you very much. Your first question is the second melanoma study and specifically the trial design. We are now in the late stage of planning with this trial. This will be run by a cooperative group. It is going to be again a large trial comparing patients who will be getting Oncophage through the standard of care. We will release to you these specific detail of the trail and at that time that we will make the public announcement, but suffice to say that we are strategically designing this in order to offset the various inherent risks in the first trial with a different set of risks in the second trial. And so that strategically it will be complimentary in terms of offsetting risks as compared to the first trial. Again we will give you specific details at that time that we will make public announcement, and we expect that we sometime in the next few months. Your second question was Aroplatin, and again asking about a second trial. As we have previously said we will be doing two additional trials and in answer to your question, yes, one of which will be a pancreatic cancer. And again we expect that to be publically announced sometime within the next six months. Your third question was regarding the excitement around oxaliplatin at NASASCO. And in answer to your question, yes, there is no doubt about it that there has found out significantly both remains multiple academic centers and major medical oncologists and also among several people in industry. And so there is no doubt that it has raised the profile of this agent and that the interest being expressed by people from several constituencies is very high.

Great, thank you very much.

Your next question comes from [Coleg Barettes from Olen].

Hi Garrett. Can you comment on the settlement that was reached between Parker Jeffery and the NASD and how does it impact antigenics?

[Garrett]: Certainly, there really as you know the background of this is that we are living a very unusual times these days in the corporate world and as some of you may know we objected to the way we were treated by the investment banking firms that took us public, because they had coursed their analyst to stop coverage of our company due to the fact that we decided to use UBS in our last offering as we done the rider and this came to the attention of the regulatory authorities NASD, DSSC and the state investigators, and the NASD investigated it. We participated in that, to some extent with our side of the story, and the NASD found Piper basically having violated some of their rules in this regard and fined both the investment banker and the firm. Now this doesn't really have any direct effect on us other than the fact that we have claimed in a letter to the firm that they have caused those damages and they should be liable for them. But to the best of our understanding their additional investigations going on by other regulatory agencies of the firm on the same matter. So we would basically wait for the resolution of these additional investigations.

[]: Okay. Thank you.

Your next question comes from [Joe Alevra from San Grains].

Hi Garro, its still Alevra. How are you?

[]: Good morning.

Question about the Oncophage, congratulations on the data you have had on the drug. We don't have a partner for this drug yet. Is that correct?

[]: That is correct.

No, any reasoning why with this great data on this drug that we've been holding back obviously you want to do a deal with higher levels, but what's the reason that we haven't looked for partner or may be we'll hire.

[]: Sure.

Can you explain on that?

[]: Sure. There are several reasons. One is the fact that we as a company decided that we would build our oncology franchise in North America to directly sell and market our own products. That was a decision made some years ago and so Oncophage is our flagship product and it was not positioned to be partnered, certainly in North America. We had had some discussions for partnering outside of North America and I will tell you that nothing has happened so far partly due to the reason that we have had a very skimpy infrastructure if you will on the deal-making front which was recently changed in that we bought in a senior level VPO business development into the company. And so we will be addressing these issues outside of North America and prioritize them over the next year or so. The other reason is Oncophage as you know is a personalized cancer vaccine. And the industry certainly the larger companies have not readily embraced personalized cancer vaccines because it does not fit their business model. They like to sell products that are off the shelf. So, that isn't to say that there would be no partners for this. It is simply is an indication of the fact that new ideas are slower to embrace as you very well know personalized medicine only became an acronym in the last several years. Before that it was not thought about at all and it's not the similar to the fact that Xerox refused to embrace the idea of personalized computing and they left the opportunity for all the other companies to explore in the 70s. So, that's basically the reason.

Are there any potential partners or potential drug companies out there that are looking to get into this vaccine area. I know lot of the vaccines have had trouble getting through in different areas. Can you extrapolate on that?

[]: Sure, I think what you are saying is absolutely correct that cancer vaccines have had a horrendous track record in the past. Part of that has to do with the sack bed, science in this field wasn't quiet as developed as it should have been before some of these products were pushed into the clinic. So a lot of these programs were advanced prematurely in our opinion. And secondarily the scientific basis for advancing them didn't exist. They were more based on hope and miracles than sound scientific data, if you will. In our case, the landscape is a little different, as some of you may know. HR proteins was a field that we were involved in alone by ourselves about six years ago, and in the last six years over two dozen institutions, scientific and research institutions have embraced this field of HR proteins and the research in the field has proliferated and this has happened with no direct support or financial support from Antigenics. It's been an organic growth at some of the major institutions and that speaks to the fact that the field of HR proteins as it pertains to immunotherapy of diseases has undergone a natural expansion because of the validity of the data and because of the preliminary clinical data.

Okay, next question on a burn rate what sort of guidance for the next year in terms of all potential burn rate from here on. )From hereon for the future.

[]: Sure. I mean it is reasonable to expect that the burn rate will increase unless we had backed on some of the programs that we pursuing right now. But certainly we are not going to cut back on the key programs, and we would like to run a pretty tight ship in general. We have periodically undergone internal processes of introducing additional efficiencies and reducing head counts where it is not necessary. We go through that periodically in order to make sure that we keep process honest.

So what will the anticipated burn rate for the entire from July 01st of this year until next year. What are we looking at burn?

[]: It is reasonable to expect that the burn rate will go up. But I think because of legal regulatory reasons it would inappropriate for us to flag numbers to you.

Well are you going to stay at the $14 per quarter?

[]: No, as I said that number will go up, but it won't go up 50 percent. It will go up by some reasonable amount.

Okay. And we have other alternatives we had to raise some cash, that is the reason I asked you about the part.

[]: Sure.

I mean we are burning a lot of cash. And thank god we did that offering in January, are you concerned about the borrowing rate here, I meant, I am anticipating, you know, with what you're telling me if it goes up it might be in the neighborhood of $60-70 million for the year. And we are in a tough environment right now. We don't know how long this biotech overhang, you know, is going to last. We can't count on that yet, you know the window will open one day, but do we have other alternatives? What are the alternatives?

[]: Sure. I think you bring up a subject that's been dear to our hearts since the beginning or the inception of the company. As once again many of the shareholders that know us will realize we have been a company that has used cash extremely efficiently since its inception. We have accomplished a lot with the cash that we have raised. The total cash raised today, it has been approximately $210 million and we have still 84 million of that in the bank and that's been over the last six-and-a-half year. That's number one. Number two, we have also been a company that's been quite wise and opportunistic in terms of fund raising before we need the cash. In fact, the company's history is such that we have never run out of cash or come close to running out of cash, and so we plan ahead. Thirdly, to the point that you made we have other alternatives of raising cash, the answer is absolutely yes, and those are the areas that will be prioritizing over the next six to twelve months.

Okay, thank you Gerrald. We will be in touch.

Your next question comes from [Jane Mac from Ryan Beck].

Hi, a quick question I guess for John. Actually, two questions, going back to the renal cell carcinoma trial. The normal trend seemed base rather recent uptake I guess in a moment, do you attribute any of that to maybe some of the interest [indiscernible] from [ASCO] or do you think it might be related. And secondly, to the analysis of the data coming from the renal cell carcinoma trial, will you be stratifying those patients based on initial tumor size and level of reception.

[]: Jane, thank you for your question. Your first question is the uptake in enrollment and I think it's a several different factors that have impacted on that. One is that the interested [indiscernible] terms of the constituent again, the patients and physicians, now that people are more aware, has increased dramatically. Two is that it is just inherent in any trial there is always a lag phase early on. And three is that we have also put in a significant effort in terms of getting the word out, getting various sides up and running, and setting up mechanisms for enrollment. And I think all of those together have [indiscernible] in again it is a significant increase in the rate of enrollment which we expect to sustain and indeed we expect to potentially go up even higher. Your second questions was, are we analyzing data, and the answer to that is, no, we've not, not in terms of the endpoints of the trial. We are not allowed to do that. It's not permissible. We will do that at the time of an interim analysis. What we certainly do monitor around the trial is enrollment and the various mechanics that that are go into that, and we certainly use that in order to react and change the way we're doing things. Now you had things are specific in terms of the relationship between data, that's versus stratification. And the stratification was set up very strategically, very robustly, and vigorously, at the time of trial was initially designed, and it's up in a way to balance between both arms, the non-prognostic variables, in order that, again the experimental arm versus the control arm will have the exact same set of prognostic variables and the exact same prognosis, so that's the only variable that we will be testing will be comparison of Oncophage versus the standard of care. I hope that has answered your questions.

Yes, yes, yes. Thank you.

Your next question comes from [Chris Easons from JP- Capital Management].

Hi, good morning. I just wanted to talk little bit about Aroplatin. If you could talk from, just remind the in the phase I, what was the maximum tolerate dose and those limiting COX and if you can walk us through where intellectual property stands these days on encapsulating oncology compounds and liposomes.

[]: The intellectual property, let me address that an alternative to Elma to get the rest of it. Intellectual property of Aroplatin is in superb position actually. We have got nearly 16 years of protection on the compound because some of the patents were recently issued. And we have both compensation of matter in the active ingredient as well as the liposomal formulation of that compensational matter. So, that is the answer to that question and now I will turn it to John to answer to the rest of the question.

I will want to do is to give you a general answer. I do not want into specifics. We will get into specifics at the completion of the trial or trials we are currently running. We will get into specifics as well at the time of the interim analysis. Your question was regarding the [indiscernible] toxicity and the maximum tolerate of doses. And what I will tell you is that we are able to get to a higher dose as compared to oxyliplatin and again from the preliminary data that was generated by Aronex the toxicity profile is differed, in particular that no neuro toxicities has been observed at doses that are very effective in terms of having an [indiscernible] response. I think that in a very general way addresses the question you are asking, and again we will get into more specifics when we will release data from the trials.

[]: Superb. Thank you.

At this time there are no further questions.

[]: Now as there are no questions once again we would thank you for your participation. We like to always keep you abreast of all the developments. So, in the mean time until our next quarterly report, if you have any questions please do not hesitate to contact us to either our Investor Relations Department or directly to me. Thanks again.

This concludes today's Antigenics Second Quarter Financial Results Conference Call. You may now disconnect.