Agenus Inc (AGEN) 2002 Q3 法說會逐字稿

Good afternoon. My name is Christie and I will be your conference facilitator today. At this time I would like to welcome everyone to the Antigenics third quarter conference call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer period. If you would like to ask a question during this time, press star, then the number 1 on the telephone keypad. If you would like to withdraw your question, press the pound key. I would now like to call the call over to Miss Barbara Mederrick. You may begin your conference.

Welcome to Antigenics's conference call to discussion our progress as well as financial results for the third quarter of 2002. This is Barbara Mederrick, Manager of Investor Relations, and with me are Garo Armen, Chairman and CEO of Antigenics; Russell Herndon, President and Chief Operating Officer; and Jonathan Lewis, our Chief Medical Officer. We hope that all of you have had a chance to review our earnings press release that went out this morning. We will view these results as well as the highlights in the call and then open it up for questions.

Before I turn the call over to Garo, I want to remind you that during the call we will make forward-looking statements that make statements including intent, and belief of management. These are not guarantees of future performance and involve a number of risks and uncertainties that may cause the company's actual results to differ early from the results in the statements. Factors that may cause differences include but not limited to the successful development of current development stage products, continued success of our commercial products, the uncertainty of alliances, and other risks and uncertainties detailed from time to time with the company's filings with the Securities and Exchange Commission. I will now turn the call over to Dr. Armen.

Thank you, Barbara and good afternoon, everyone. I'm pleased to provide you an update on the company's progress. First I will review the financial highlights for the third quarter, then Dr. Louis will report on our clinical program and the progress of our lead clinical candidates, and finally we open the call to questions.

For the third quarter this year, the company incurred a net loss of 13.2 million or 40 per share. This compared with a net loss in the third quarter of 2001 or 44 million or $1.53 per share. This performance last year included a number of writeoffs related to the Aronex Pharmaceuticals acquisition.

R&D costs were 10.4 million in the third quarter of 2002, compared with 9 million for the same period in 2001. General and administrative costs were 4.3 million in the third quarter of 2002 compared with 3.7 million for the same period in 2001. Cash and cash equivalents and marketable securities amounted to 70.5 million on September 30, 2002. Our net loss reflects the increased enrollment in our phase three clinical trials for Oncophage in renal subcarcinoma and metastatic melanoma as well as phase two trials over metastatic colorectal cancer. In addition, we have devoted resources to protect and expend our intelectual property and announce the issuance of 15 new patents in the third quarter, allowing novel applications of proprietary technology in a broad range of disease areas.

As you know, just to summarize, Antigenics has four products in nine ongoing clinical trials currently. Our most advanced product is Oncophage which is enrolling patients in two separate phase three trials in melanoma and renal subcarcinoma, which is kidney cancer. Our achievements in the third quarter included the Food and Drug Administration granted Oncophage orphan drug status in metastatic melanoma. This is in addition to the same status we achieved earlier in the year for renal subcarcinoma, providing Antigenics with potential market exclusivity in metastatic melanoma for seven years from the FDA marketing approval date. As you'll hear from Dr. Louis, our clinical trial programs are proceeding at a rapid pace ,and we're clearly excited about the response at the response we have gotten from the community in general.

Our R&D engine continues to be very productive with recent discoveries we have made rapidly moving into the lead development stage. And recent approval of third generation platinum analog by a third company has created a lot of excitement, as you'll hear again from Dr. Louis, about our product Araplatin which is in phase two clinical development, currently. In the third quarter we also expended our leadership team with the addition of Frank Applolli to the Board of Directors. Currently he is the Chairman of Monsanto company, and he brings to us more than three decades of management experience and extensive drug discovery and product development expertise. We are proud to announce the addition of Deanna Peterson as Vice President of Business Development. She joins us from Coley Pharmaceuticals, and has assumed responsibility for business development within Antigenics including the out-licensing of some of our products and technologies.

During the last quarterly conference call we discussed the symposium on cancer vaccines, which was sponsored by Antigenics and took place during the annual meeting in May. Almost 400 people came to listen to and participate in an open dialogue with seven leaders in the field, including our co-founder and chief scientific officer. A summery of this meeting was published in the October issue of the journal of National Cancer Institute. Also in the third quarter, Antigenics was a corporate sponsor of the third international conference on proteins and immune response. This conference brought together leaders, clinicians, and acedemicians who study and practice the use of proteins. Several years ago, as you remember, only a few were doing research in this field. Today these proteins are considered textbook immunology and are studied world-wide. Our science has certainly become main stream.

I would now like to introduce Dr. Jonathan Lewis, our Chief Medical Officer who will give you a progress report on our program. Jonathan.

Thank you, Garo. I will update you on the Oncophage, Araplatin, and AG 702 programs. I will also include a brief review of the recent publication of the phase two melanoma study in the general oncology.

Let me start off with Oncophage and with that, update you on the renal cell cancer program. To that end we have made superior progress with the phase three randomized trial for renal cell cancer. During this third quarter we enrolled 170 new patients, and this is a 50% jump since the last conference call. As we have reviewed with you before, if approved, Oncophage will be the very first and only product used with these products used in these patients with phase two and three kidney cancer, and will represent a significant advance in the treatment of these patients. The next heading in the Oncophage program is the melanoma program. As you know we opened enrollment for a multi-sensor phase three randomized in metastatic melanoma in May. This represents our second pivotal trial with Oncophage.

In the third quarter we enrolled 21 patients in twelve clinical centers. There is a major interest in the study and in future Antigenics melanoma trials, and the reason for that is there's a major unmet need in treating this disease as the results from oncophage certainly are promising. Like Oncophage in renal subcarcinoma, the FDA granted Oncophage fast track and orphan drug status in melanoma. The trial that was published in the journal of clinical oncology was one of only about 5% of the presentations that will make it into a peer review journal. In this trial, 39 patients with stage four melanoma, most of whom have not responded to treatment with established therapies were evaluated. All patients underwent surgery to remove tumor tissue, which was then used to produce their personalized oncophage vaccine. The surgery was followed by at least one cycle of Oncophage treatment, and that was one inject weekly for four weeks in all of these patients. Of the 28 patients who had residual disease after surgery, two experienced complete clinical responses, in other words, complete disappearance of all disease after treatment of Oncophage. In addition, these two patients survived tumor-free for at least two more years, and this in the face of a median survival of only seven months for patients with this stage four melanoma. In addition another three patients who had tumor remaining after surgery experienced extended disease stabilization, and this ranged from five-nine months after oncophage treatment. Of the eleven patients we are rendered disease-free by surgery, three experienced long-term disease-free survival, and that ranged from 8-21 months.

In addition to these clinical responses, researchers also evaluated a portion of these patients for an immunological response to Oncophage vaccination. Of the 23 patients that vaccination could be done, significant increases in melanoma specific t-cell activity was observed in eleven patients. Five of whom experiences complete responses or long-term disease stabilization.

I will now shift gears and speak to you about Araplatin. There has been a tremendous amount of excitement around Araplatin due to the recent approval of Oxaliplatin for use in colon cancer. Our product has an active metabolife that is identical to Oxaliplatin, and we are extremely encouraged that Oxaliplatin was approved in the shortest time over in terms of review by the FDA. Araplatin may have an added advantage over Oxaliplatin because of the lipsome encapsulation which is likely to increase the drug's bioavailability and safety profile. We have initiated a phase two trial with Araplatin in colon cancer, and so far ten patients have been enrolled. This trial is being conducted under supervision of Dr. Dan Von Huff at the Arizona Cancer Center, and data is expected from this early next year. We intend to start an additional trial with Araplatin with patients with pancreatic cancer, and this will be by year end.

I will shift gears now and speak to you about AG 702. As you are familiar, we initiated our first study that applies the use of protein technology and infectious disease late last year. Again, this product is designed to be a curative vaccine for patients with genital herpes, and an off-the-shelf product. Unlike Oncophage, because of its application to infectious disease, there currently is no cure for genital herpes, and it is a major problem in the U.S. and other developed countries The phase 1 trial being conducted at the Fred Hutchison Cancer Center, again, to remind you, the premier center for herpes clinical trials, is progressing well. The first dosing group is complete, and the vaccine has thus far proven to be quite safe. This application of proteins for infectious disease is progressing well, and we expect data from this trial in early '03.

I will now shift gears and speak to you about ATRA IV. In October, the journal of the American Cancer Society, the journal for cancer, published the results of dose finding phase one trial using ATRA IV in combination with Intrafere and Ulfa in patients with stage four renal cell cancer. Of the twelve evaluable patients, two experienced partial responses. Notably, one of these responses is ongoing at more than 91 weeks. Three additional patients experienced stable disease for at least 24 weeks, and in one of these patients, the disease has remained stable for one year. In addition to these clinical responses, the results showed that the combination that was well tolerated and associated with antitumor activity patients with advanced reg cell carcinoma. And these observations are expanded in ongoing studies.

Let me summerize what I have said. This has been a very successful quarter in the clinical development program. We have experienced a surge in enrollment in our renal cell trial, an excellent rampup in the melanoma and colorectal trials, and significant peer recognition with recent articles in the Journal of Clinical Oncology, the Journal of the National Cancer Instute and the Journal of Cancer. We are making progress on all fronts and are on track to meet our goal of commercialization Oncophage in the year '04. That includes the clinical development update. Thank you.

Thank you, Jonathan. We will now open the call to questions.

Thank you. At this time I would like to remind everyone in order to ask a question, press star then the number 1 on the telephone keypad. We'll pause for a moment to compile the Q&A roster. First question comes from the line of Laura Torota.

Hi, Galee Mirage from Paling Groups. Congratulations on a very successful quarter. Garo, can you elaborate on the patent dispute with StressGen?

We, as you know yesterday we announced that we filed an opposition in the European patent office for the European patents. Two patents that been issued to StressGen Biotechnologies. On grounds that its claimed invention is obvious, lacks novelty, and is and insufficiently described and encompasses non-patentable subject matter as a result of that. Antigenics also filed a request in the US the patent and trademark office for the re-examination of patents that have been issued in the U.S. and licensed to StressGen on grounds that the invention in each of these US patents is not novel and is obvious of an earlier publications. Also these patents concern proteins that are fused to antigens and their use in the immune therapy and represent StressGen's only issued patent in Europe and the U.S. Some of you may remember that we filed an earlier opposition in Europe and were successful for having the patent revoked in that case in its entirety in the year 2000. I think its also important to understand that these patents have no bearing as we stated in our press release on any of our technologies currently being pursued or contemplated for pursuance. We filed these oppositions because we are the leader in the field and we believe StressGen's patents are inherently flawed and invalid. While we welcome any and all competitors in our field, for as long as they have valid intellectual properties for supporting participation in the field. That's basically what we have, which we publicly announced, and other documentation is available in the filings of the opposition which are public.

Thank you, Garo.

Next question comes from the line of Andrew Guidkin.

Thank you. Appreciate the informative comments. One quick question referring to the paper that was published in the journal of clinical oncology. I was curious. read the paper, I have one question and that was of the patients who responded either with the two at the complete response and a couple with stabilized disease, did you guys break out of those responders how many received the one cycle versus patients, I think there were also a group of patients who got two cycles?

I will allow or let John Lewis to answer that question.

Thank you for your question. The answer is there were two patients with complete responses both of whom each received one cycle, in other words, four vaccines. Of the patients with the stabilization of disease there were three, two of whom received one cycle of vaccine, the third of whom received two cycles.

Great. Thank you very much, I appreciate it.

Next question comes from the line of Brandon Frad.

It looks like from the enrollment on the renal cell that you hit the 500 mark that you expected to enroll. Does that mean -- can you give a general sense of timeline when we might have the final data from that trial?

Sure, I'll give you the timelines and ask Jonathan Lewis to provide the details you are aiming to ask. The timelines, we are on tract to complete enrollment by the middle of next year, and on track to look at the interim data by the end of next year. And if that data is statistically significant by then, it will allow for us to file for renal cell carcinoma at the end of next year. Conversely in melanoma, we're looking at the same exercise with the final analysis by the end of next year. In renal cell and melanoma, it's the final analysis. But John, if you could give the details on the enrollment.

Brandon, the enrollment now is heading toward 600. The current rate of enrollment is greater 80 patients per month, and that is also increasing month by month. As we enroll patients, what we are doing is targeting evaluable patients at the end of the trial. To that end the current ratio between enrollment and evaluable patients at the end of the trial is less than 2:1. So in other words, in order to get 600 patients, we are looking to enroll 1200. To that end we are again well on target in terms of completing enrollment towards the middle of next year.

And just to clarify, Brandon, the reason for this ratio is that we enroll patients at the time of surgery. At that time these patients are not completely staged yet to figure out whether or not they meet the staging criteria for enrollment in this trial. It takes several weeks to establish that through pathology and other means, and we won't randomized patients until they are confirmed to be eligible based on our station criteria ,and that's where the 2:1 ratio comes in, not because there's a 50% dropout in the trial.

And with the melanoma, where are you with enrollment?

Melanoma, as you know, just started recently in the summer and we are in the process of just ramping up as you have seen in our announcement, ramping up in terms of centers. We have enrolled approximately 21 patients and seen a pickup in the enrollment of patients on a weekly basis going forward and ramp up in the next upcoming months.

The goal is 200 patients?

The goal is 350.

Okay. Thanks.

Next question comes from the line of Joy Mashal.

Hi. Thank you for taking my call. I wonder if you can give us an update on your Colomune P program. I know that you're not taking the lead in terms of the development, but just where your partner is right now and when we might see the next data.

Right, Colomune P, as you know it is not partnered yet, and we generate data, as you know, several months ago, and that was presented at two conferences. And we are in the process of evaluating how we will go forward with that product. As I mentioned in my call, we hired a head of business development recently. We did not have that function headed by a senior executive prior to us -- prior to this, and we are looking at the best means of taking this product forward. John, do you have any comments or additions?

It is going to be taken forward. I'll tell you there is a large company that is very interested in developing this. Again, we'll have news about that new the near future.

Okay. Great. Sorry for that mistake. Okay. Then when do we expect to see data in colorectal cancer with Araplatin?

As mention we'll have data by the end of the year. I don't believe we'll make that public. It will be some time beginning next year and I will say sometime within the first half of next year and going to depend on timing, on the various cancer meetings going on, and, again, we'll decide that based on these different meetings.

Thanks, very much.

Your next question comes from the line of Mark Moname.

Thank you. Good afternoon. I have a general question and a specific one, too. Can you comment on what kind of milestones and events we can expect to see and hear about in the beginning of next year?

I think by the end of this year, as you know, a number of milestones we've spoken about in the last several months have started being met, such as the publication in the Journal Clinical Oncology of melanoma results. In addition to that a couple of other publications and those have had as well. One on ATRA IV and one of our symposium. We won't get results for six months on the colorectal trial with Araplatin. We just started enrolling patients in the pancreatic trial. We will get results from the AG 702 trial and go into the clinic within the next several quarters with our second generation herpes product, which is a multivaliant product, and it is designed to be a curative product. As you may well know, the AG 702 product is monovaliant and the advantage of a multivaliant product is such that that most companies out there, including some of the leaders in the field, have recently shifted their strategies to a multivaliant approach having seen much more efficacious results in early clinical trials with a multivaliant approach rather than a monovaliant approach, which is something we've spoken of for some time now with regard to immunological approaches to the treatment of both cancer as well as infectious diseases. That trial will yield some results. We may start and we have said a third trial with Oncophage. And crystallize our strategy for the development and commercialization of ATRA IV. I think you'll hear a lot more about how we'll go about moving in the clinical with ATRA IV in the next 6 months. Those are the clinical milestones that we anticipate. In addition to that, we have now a robust business development program, and there will be a number of milestones within the coming year with regard to licensing of some of our programs. As you know, we have kept most of our technologies and products in house. We've developed them to the stage where we think the value will be optimized, and now it's time to mind some of the benefits of the efforts, if you will some of the benefits of those assets, if you will. Those are the kind of things that we anticipate over the next six to twelve months.

Terrific. For clarification, did you say you already started the pancreatic cancer trial?

We have started the pancreatic cancer trial.

Okay, that's great. Congratulations. That's a great milestone. For the ATRA IV, you said you would start phase two trial next year in lymphoma?

We are evaluating exactly the indication and stage of disease that we will proceed with ATRA IV, Mark, and I think we will provide clarification over the next several months.

Okay. Specifically, the journal paper that was recently published on melanoma, can you comment on any comments you've received from the real world clinicians, how do you see this fitting in for this tough to treat disorder? What are the plans for the future?

Certainly, I will ask Jon Lewis to address this issue.

Thank you. To that end let me say that each publication, JCO selects somewhere between 1-3 of their articles for which an editorial is written. To that end this was one for which an editorial was written. It was deemed important enough by the editorial board of the journal of Oncology to write an editorial. The response from physicians on the outside has been significant. I will tell you that that is throughout the world for the U.S., Europe and Australia. To that end what has also happened is that two of the largest and in our opinion the major groups involved in developing melanoma treatment are currently working closely with us to continue the development of Oncophage in the treatment of melanoma. That, of course, started before the actual publication but certainly this publication has just validated a lot of this, and the interest that has been coming from all corners of the globe has been robust.

That's great. Great. And how about state-of-the-art -- one more question, I'm sorry. I was untruthful before. One more question. Could you comment on what you see as the state-of-the-art now in cancer vaccines? There seems to be increased attention paid to this novel immunotherapy. Can you talk about cancer vaccines and where we are and where we're going into the future?

Let me take a crack at that first. As you know, historically, the field of cancer vaccines or therapeutic vaccines in general has idealed a lot of disappointments. While it is not due to the fact that an immunological approach does not make sense, because inherently an immunological approach makes a lot of sense given that's the way the body combats many diseases, but rather than we haven't had the right tools to be able to accomplish it. Therefore, we've had -- because we haven't had the right tools, we've had a lot of disappointments in the field. For many years we made it clear that for a therapeutic approach, two of the very key determinants are, one, a multivaliant approach in the therapy of cancer and infectious diseases and specifically for cancer, a personalized approach because of the unique repertoire of antigens of individual cancer patients. Secondly, primarily a t-cell mediated approach is necessary in order to be able to provide the appropriate bang for the buck, if you will, in terms of immune response. So we have gone public with this for a number of years and explained to the world that our approach, our technology encompasses both and that's why it has a high or higher responsibility of success that's what's been done before. So any approach in the field of vaccines, if you will, that is multivaliant and/or individualized and has been based on a t-cell activation has a much better shot than those that don't and we clearly have both.

Thank you very much for all the background information and congratulations on the publications.

As a reminder, if you would like to ask a question, please press star then the number 1 on the touch tone phone. We have a question from Joe Aguilera.

Congratulations on a great quarter. I have a question. Obviously you have a strong patent position. Your intellectual properties, a deep pipeline and due have any partners which I agree you holding on for the value, but how are you going to run with this amount of cash? What is the burn rate from October 1 through next year, approximately? If you can help me out on that, I know it's hard. But with this great pipeline and if the market stays like this and biotech stays dead for the equity markets, can you tell me the approximate burn in the next year, if you can help me out?

Thank for the question and you asked the same question during the last call. I'll give you an answer that is similar. We expect the burn rate to be up modestly, not a lot, simply because this year had a number of items that will not occur next year. For example, we had some significant debt repayments particularly on behalf of the companies that we acquired this year, which will not occur next year because we have very little or no debt left. Secondly, we started a multicenter clinical trial in renal cell carcinoma with about 130 centers around the world and significant start-ups associated with that. We'll have other costs next year, but we won't have the significant start-ups associated with those trials. Because of that our burn rate will perhaps go up but it will be modest from where we are this year.

Can I assume it's going to be approximately 60 million or north? Can you give me a range?

I think it would be inappropriate for us to make these forecasts. I would urge you to look at analysts' reports.

I care about you. I'm not interested in the analysts.

I'd like to be forthright with you with an exact number. If I were provide you with an exact number, we would be violating SCC rules, and that's part of the reason I would not.

I'm behind you, Garo, 100%.

Let me address this now in terms of how do we fund a company going forward. We have a number of means of financing. As I said before, one of the attributes that puts Antigenics in a different category then many biotech companies is over the last eight years, as you know, we've gone through the ups and downs of the biotech sector, and we have managed to fund ourselves appropriately through some of the very difficult periods of the biotech cycle. In addition to that, we have four options available for us to monetize going forward. One is certainly we have a revenue producing business that has doubled in revenues in the last year and a half or so, and we can monetize that by potentially selling it because it is not in the core area of our future direction. It is in the animal health product, and we're not an animal health company. And that is a profitable product, by the way. Secondly we have exposure to certain partners who for various reasons there are opportunities to perhaps monetize our exposure to that partner, and that's something we are looking at and investigating currently. Thirdly as I mentioned Deanna Petersen joined us recently to start a robust out-licensing program for some of the technologies that you referred to. Clearly we do have a robust pipeline and cannot afford to develop everything to commercialization. Within the next year I expect to consummate a number of deals where there will be payments made because of the advance status of a number of these programs. Fourthly, in addition to all of this, we have managed to tap the equity markets when necessary, when the window is open and that's always an option that we will entertain going forward. So that is the full answer to your question, if you will.

Thank you. Last one. On the Oncophage, the metastatic skin cancer in the 2 out of 28 patients which is terrific, you showed good results there. Is there anyone close in terms of competition on the metastatic skin cancer area?

John, would you like to address that issue?

The answer is, no, for several reasons. Just going briefly into that, there is a high rate and importantly the duration has really been exceedingly long. That's something that has not been seen before. In terms of various other vaccines, as you are aware, several other company trials have failed recently. That is something that has not surprised us based on what Garo said because of the mechanistic differences. Again, getting down to the issue of the mechanism we are using, the methodology that we're using, and the results we are seeing, there is no one else who is anywhere near in terms of what we are doing in terms of getting these kinds of results.

Okay. Congratulations, both of you.

Thank you.

Your next question comes from the line of David Lashmit.

I have a question for Jonathan. Can you tell me what the end points are for the phase three clinical trial for melanoma?

Yes. Thank you for your question. The primary end point is survival. The secondary end point is time to progression and then additional secondary end points are the usually ones which are diverse events. The reason for having survival as a primary endpoint is several-fold. One, this is what the FDA wants. Two, even though they would concede to us time to progression, because we have fast track designation, we decided not to do that and it's really for a practical reason. The practical reason is that in this disease, in other words, stage four melanoma, the time difference between progression and death is unfortunately very short. So there would be very minimal benefit for us time-wise, and from a practical disappoint, it's easier and cleaner to measure the end point of death rather than progression.

I understand. But how does this play out if the patient survives whereas the control dies? As soon as enough of the controls die then the trial terminates?

I don't fully understand your question. Yes, what we are measuring our total events. The total events are in both arms of the trial.

Okay. So if your patients who get the vaccine don't die, you can still end the trial, you don't have to wait for their death.

That's correct. Yes.

Okay, thank you, very much.

At this time there are no further questions.

Okay. If there are no other questions, I'd like to thank you all for your time and attention and I'd like to turn it over to Barbara for some closing announcements.

A replay will be available approximately two hours after this call. You can dial in to 1-800-642-1687 from inside the U.S. or the international dialin number is 706-645-9291. The code is 5994757. It will be available on our website in two hours from now. Thank you for participating.

Thank you four your participation. You may now disconnect.