Agenus Inc (AGEN) 2002 Q4 法說會逐字稿

Good morning, my name is and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Antigenics fourth quarter and full year 2002 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer period. If you would like to answer a question during this time, simply press star and the number 1 on your telephone keypad. If you would like to withdraw your question, press star and the number 2 on your telephone keypad.

I would like to turn the call over to . , you may begin your conference.

Thank you Operator, and good morning. Welcome to Antigenics' conference call to discuss our corporate and clinical progress as well as our financial results for 2002.

This is from the Investor Relations Department, and with me today are Garo Armen, Chairman and CEO of Antigenics, Russell Herndon, our President and Chief Operating Officer, Jonathan Lewis, our Chief Medical Officer and from our Corporate Finance Group.

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 these results as well as highlights of the quarter and fiscal year in this call, and then open it up for questions.

Before I turn the call over to Garo, I would like to remind you that during this conference call, Antigenics representatives will make forward-looking statements, including statements about expectation for developmental program and clinical trials, anticipated regulatory filings and actions and future financial performance. These statements are subject to risks and uncertainties and Antigenics' actual results may differ materially from these projected in the forward-looking statements.

Additional information about these risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission. Antigenics undertakes no obligation to update the forward-looking statements made on this call.

I will now turn the call over to Dr. Armen.

Thank you . Firstly I will provide you with financial highlights. Secondly I will summarize our expectations for the year 2003. Thirdly, I will go briefly over some of our accomplishments for 2002. And then I will turn it over to Dr. Lewis to cover much of the progress we've made on the clinical trial.

On the financials, for the first three months ended December 31st, 2002, Antigenics incurred a net loss of 16.3 million or 49 cents per share. This compared with a net loss of 13.8 million or 48 cents per share for the same period in 2001.

For the year ended December 31st, 2002, Antigenics incurred a net loss of 55.9 million or $1.70 per share compared with a net loss for the same period in 2001 of 73.5 million or $2.61 per share.

Included in our 2001 net loss, is a non-cash charge to operations of 34.6 million for the write-offs that were incurred for the in-process research and development acquired in our merger with , which was completed in the second quarter of the previous year.

Revenues for the three months and year ended December 31st, 2002 were .8 million and 3.4 million respectively, compared with 1.6 million for the three months ended December 31st, 2001, and 4.6 million for the year ended December 31st, 2001.

Total research and development expenses for the three months and year ended December 31st, 2002, were 11.5 million and 40.0 million respectively, compared with 9.8 million and 31.4 million for the same periods in 2001.

Total general and administrative expenses for the three months and the year ended December 31st, 2002, were 5.8 million and 19.5 million respectively, compared with 3.4 million and 13.8 million for the same period in 2001.

Cash and cash equivalents, and short-term investments amounted to 58.7 million on December 31st, 2002. We added to this balance recently, as many of you know, through the completion of a 62 million follow-on offering of common stock in January of 2003, raising proceeds approximately by 59.6 million, after deducting for underwriting discounts and expenses. These proceeds, in addition to our other working capital, will fund the company through an important period, during which we expect to achieve critical clinical milestones.

Let me now touch upon our expectations for 2003. As we have indicated before, 2003 is a pivotal year for us for several reasons. A number of our clinical programs are maturing to the point of generating data, which will be used for either one of the following: one, potential product registration for commercial launch of products; we could have up to three BLA filings over the next 12 to 18 months with two separate products; secondly, demonstration of efficacy of our over the current standard of care. We expect to generate data this year to achieve that; three, confirmation of a number of other trials done with Oncophage. As you know, we have done a number of phase II trials, and we have published some of these trials and expect to publish further in additional journals in the upcoming year. We expect additional trials done during the course of this year, or data generated during the course of this year, to confirm those results.

We also anticipate the starting of clinical trials with our multi- and herpes HSP product, which is a therapeutic product, and we expect to complete the preparation to enter the clinic with our next generation Oncophage product, which is a significant milestone for us as well, because this methodology or product requires a much smaller sample tissue size than we process today.

Let me now turn to over to some of the accomplishments of 2002. During 2002, we had important achievements on the regulatory front. In addition to the first track designation received for Oncophage in 2001 for renal cell carcinoma, Oncophage received a second fast track designation from the FDA in February of 2002 for the treatment of metastatic melanoma. During 2002, Oncophage was also granted orphan drug designation by the FDA for both renal cell carcinoma and metastatic melanoma.

We also continued to grow our intellectual property. Our propriety heat shock protein technology platform expended with the issuance of 24 new U.S.-issued patents, including nine patents issued in the fourth quarter of last year alone. These nine new patents broadened protection of the company's use of heat shock proteins, not only to treat, but also to prevent cancer, as well as expend the application of the proprietary HSP technology to infectious diseases, wound healing and animal care.

Antigenics now has over 50 issues patents worldwide in its heat shock protein intellectual property portfolio, and over 80 issued patents worldwide in total. During this past year, we also expanded our leadership team. In January of 2002, Russell Herndon was promoted to the newly created position of President and Chief Operating Officer. In March, joined our Management Team as Vice President of Corporate Communications.

In July, Frank AtLee III, the current Chairman of Monsanto Company, joined our Board of Directors, bringing with him more than three decades of management experience and extensive drug discovery and product development expertise. Also in July, , formerly of Pharmaceutical Group, joined our Management Team as Vice President of Business Development.

Now, I'd like to introduce to you Dr. Jonathan Lewis, our Chief Medical Officer, who will give you our progress report on our clinical programs. Jonathan?

Thank you, Garo, and good morning.

I will update you on our lead programs - Oncophage, AG-858, Aroplatin, and the AG-700 series, and also share a few highlights with you regarding recent publications in peer review journals and conference activity.

I will begin with a progress report on our lead product, Oncophage, and start with the renal cell carcinoma trial. Enrollment for this Phase III trial is well on track with 70 percent of the trial enrolled as of today in approximately 130 centers worldwide. Based on this, we are confident that we will achieve our previously reported milestone for completed enrollment by midyear. In addition, we are on track to perform an interim analysis of these data from this trial by the end of this year. The interim analysis will be triggered when in aggregate, 52 patients have recurrence of their disease. If there is a statistically significant separation of the recurrence-free survival curves between the two arms of the trial in favor of Oncophage, we expect to file these data in a filing with possible FDA approval and product launch in '04.

Let me now speak to you about Oncophage in melanoma, and as you know, we opened enrollment for the Phase III trial of Oncophage in melanoma in the second half of '02. This trial is our second pivotal trial with Oncophage. We have recently brought on line an additional 30 clinical centers which are now all open for enrollment of patients, and as a consequence, we expect significant ramp up of enrollments in the coming months analogous to the ramp up that we have seen in renal cell carcinoma.

For both of these Phase III trials, there are currently about 160 clinical sites worldwide, including sites in the United States, Canada, Europe, Australia, Israel, and Russia.

Let me now speak to you about the second lead product, and that is AG-858 in the context of CML. 2002 has been a very productive year for Antigenics on the heat shock protein front. In December of '02, we reported data from a prior study combining our personalized cancer vaccine, AG-858 with Gleevec, for patients with chronic myeloid leukemia, or CML. AG-858 is based on the HSP heat shock protein 70. In this trial, five out of five evaluated patients have shown objective clinical responses. Two of these patients have had a complete molecular response, as measured by PCR, which is the polymerate chain reaction, which is by far the most sensitive measure available to detect the presence of leukemia cells. Prior to their treatment with our product, four of five patients in the study had been determined to have be unresponsive to treatment of Gleevec alone.

Based on these very encouraging data, we are initiating a phase II trial for Gleevec unresponsive patients. This study will be led by Dr. Brian , the physician-scientist who designed Gleevec. I will now move onto another lead program, Aroplatin. In July of '02 we initiated a phase II study of Aroplatin as a monotherapy for colorectal cancer. As you are aware, there have been tremendous excitements around Aroplatin, due to the approval last year of Platin for use in colon cancer. is also a third generation , and as you know was approved by the FDA in record time. Aroplatin is a lyposomal formulation of another third generation , which is designed to overcome the neurotoxicity and drug resistance associated with current based chemotherapeutic agents such as

This trial in colon cancer is being conducted under the supervision of Dr Dan Von Hoff at the Arizona cancer center, and data are expected in the first part of '03. In addition, we have initiated a phase I/II trial, led by Dr. Lee Rosen at the John Wayne Cancer Center in Los Angeles. This trial is designed to evaluate the activity of Aroplatin in advanced tumors that are amenable to therapy. During the course of this , we expect to gather data on Aroplatin in patients who are not responding to .

Let me now move on to the AG 702 and 70x series. Our genital herpes program, with AG 702 and x continues to progress well. We are enrolling the next dose of our AG 702 pilot phase I trial at the University of Washington, and we have observed encouraging immunologic activity in this trial, and this is in the lowest dose group. Based on the proof of priniciple that we are demonstrating with AG 702 showing immune activity and that recombinant heat shock protein as a vaccine is safe, we intend launching the next phase of our herpes program.

We will file an IND and begin clinical testing this year of the multi- herpes vaccine AG 70x, and this will contain in excess of 30 HSV antigens, versus the one antigen contained in AG 702.

Let me shift gears now and tell you about publications during this last year. As we are all aware, it is not enough to generate positive data and promising results in clinical trials. We clearly also need to gain peer acceptance and approval. We have made significant strides in raising our profile and gaining peer recognition with the publication of our first clinical data in peer-reviewed journals in 2002. To briefly recap, we published data from our phase II metastatic melanoma trial in the Journal of Oncology in October of '02. In this study, which is conducted by Drs. , at the Institute in Milan, 39 patients with Phase IV melanoma were evaluated. Antigenics has also had two articles published in '02 in the Journal of the National Cancer Institute. The first, about heat shocked protein vaccines was published in early January. In this article, , the Deputy Director of the NCI's Division of Cancer Biology describes how science and clinical biology as, and I quote, "the nicest, best integrated basic science and clinical story there is in vaccine research".

The second JNCI article summarizing the symposium we sponsored at ASCO in May was published in October.

In addition, a prospectus of analysis, published in the Journal Urologic Oncology demonstrated that quality of life of metastatic kidney cancer patient receiving Oncophage remains stabled or improved throughout the course of treatment and follow-up.

Finally, we published two positive ATRA-IV studies in the Journal of Cancer, which is the journal of the American Cancer Society. The first of these was a Phase I renal cell trial using interferon together with ATRA-IV.

The second was a Phase II study in AIDS associated Kaposi's sarcoma.

Let me now move on to conferences and meetings.

Antigenics has continued to increase our visibility and profile at key conferences and meetings. In May of 2000 in some clinical results from, sorry, May of 2002, we announced some clinical trials from five trials at the 38th annual meeting of ASCO, the American Society of Clinical Oncology.

These studies show that multiple patients with melanoma, gastric or colorectal cancers appear to benefit clinical from receiving Oncophage. Also in relation to Oncophage, Antigenics presents a positive immunologic result from the Phase II trials of Oncophage in treatment of melanoma and colorectal cancer during the AACR or American Association of Cancer Research Meeting in April of '02.

Finally, Phase I data was presented at the Conference of the National Foundation for Infectious Diseases in May of '02, showing that elderly patients have significantly higher levels of immune responses with Quilimmune-P, Antigenics pneumococcal vaccine as compared with commercially available vaccines.

In summary, Antigenics has had an extremely successful year in our clinical program. We have two pivotal Phase III Trials well underway, with interim data expected in one of these trials by the end of '03.

We have succeeded in raising our visibility and increasing our presence in the oncology space. We continue to make progress on all fronts and we are well on track towards meeting our goal of bringing Oncophage to market in '04.

That concludes the clinical development update. Thank you.

Thank you John. Now we'll open the call to questions that you may have.

At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Your first question comes from with .

I was wondering if you could give me a little bit more details on the ATRA patent trial in terms of the colorectal cancer patients, what stage patients they are and what prior therapy they've had, and what the control arms are?

Certainly, I'll ask John Lewis, our Chief Medical Officer to answer that question.

The trial in colorectal cancer is being done in patients with stage four disease, in other words, metastatic disease. It is a phase II trial. It is a control trial, but not randomized, so there is no control arm, and the patients have previously failed first-line, conventional colorectal cancer therapy.

All right. Thank you.

Once again, in order to ask a question, please press star, then the number one on your telephone keypad.

We'll pause for just a moment to recompile the Q&A roster.

Your next question comes from .

Yes. I was wondering, when Oncophage is ready to go to market, do you plan to license this to a pharmaceutical company, merge with another company, or take care of the production and marketing yourself?

Let me answer that question in several ways. In North America, particularly the U.S., we have always signaled that we intend on becoming a fully-integrated company to sell, market, produce our own products in oncology. And that is the intent of the company. As you may know, we already have a production scale manufacturing facility. We're in the process of moving to an expanded manufacturing facility over the next nine months, and we anticipate that our manufacturing needs will be met by us in the foreseeable future through our own efforts.

As far as sales and marketing goes, our anticipation is that we will enter the commercial marketplace somewhere between 50 and 100 field salesman detailing oncologists at some of the major centers. That is pretty much standard in the business, and because of the focus this business, one can certainly launch a product effectively in the oncology field with approximately 50 to 100 field salesmen, and that we will do on our own.

As far as the international exposure of Oncophage is concerned, we are currently looking at all options, particularly in Europe and Asia, to partner with companies that will either co-market the product with us, or perhaps do it in return for some royalty payments. And those are under review, and we'll have clarification on that over the next 12 months or so.

OK. Thank you.

Your next question comes from Jim of .

Good morning.

Can you tell us what percentage of your R&D dollars goes to each product platform?

Approximately 85 percent of our expenditures are on the four focus products, and I'll further break down that for you; that is Oncophage, eight -- AG-858, which is a product Lewis spoke about, our herpes therapeutic product lineup -- the AG-700 series -- and Aroplatin. We have made those four areas our principal focus, and 85 percent of our expenditures are on those. Of that 85 percent, the majority -- meaning over 60 percent -- are spent on Oncophage.

Sixty percent you said?

Over 60 - six zero percent ...

OK.

... on Oncophage.

And do you still - are you still working on the pre-clinical CD91 I believe it was?

Absolutely. We haven't - we haven't spoken about that simply because it's a pre-clinical program, but that program is on target and there are some very exciting publications that have come out on that subject matter by us and others in the field as recently as the last couple weeks.

Thank you.

Your next question is from the line of with .

Hey, gentlemen. Thank you very much for the call, and Garo, I wanted to say hearty congratulations for , which has nothing to do with Antigenics, but it was a great personal victory.

I had a question about the second-generation Oncophage. If you get approval for the first generation Oncophage, is there a chance that you could use the second-generation Oncophage as a compassionate use?

, it's too early to make judgment on that at this point. Obviously our strategy has always been not to take any shortcuts. And when there is merit to taking a shortcut, we will only do it in discussions and agreement with the FDA. So, I would say a year from now we'll be in a much better position to give you details on that, but right now it would be too early to speculate on whether or not we would go that route.

Thank you very much.

At this time, there are no further questions. Are there any closing remarks?

Operator, perhaps we should give another 10 - 15 seconds. If there are any other questions, we'll be delighted to take them. If not, we have an exceptionally shy crowd today. We thank you for your attention and interest.

You have a follow-up question from .

Yes, I was just wondering - do you plan on doing any more follow-up offerings - stock offerings?

As you - as you know, we have historically done offerings I would - I would characterize it as necessary. Our company, unlike many other biotechnology companies in the field, has raised $270 million since inception with approximately 110 million-plus of that still in the bank, and we've accomplished all that you have heard so far. So, given that the company is - or the - or the insiders of the company including myself are significant shareholders of the company - the insiders own still about 25 percent of the company today, we are not - we are not interested in diluting unnecessarily our shareholders while - while - and it's very important to make this point - we're also not likely to cut - to cut the cash position too close to not be able to deliver on our mandate of developing products successfully.

So, our history suggests that we always would like to have a comfortable level of cash in order to see through at least an 18-month period going forward.

And with, if the question is will we do additional offerings before we become a cash-flow positive company, my answer is probably yes. If you ask me what are the chances of doing an offering over the next three to six months, I would say low, not nil, but low for the reasons that I articulated.

Until we become cash flow positive, the company will be a net earner of cash, which is typical of any development stage biotechnology company, but by comparison, we've used monies very carefully, and we've accomplished a very substantial amount for the monies that we've used so far.

Yes you have. OK, thank you.

There are no further questions at this time.

OK. If , would you like to summarize the closing remarks, and Operator, if there are any additional questions in the meantime, please reflect that to us.

Yes, sir.

A replay will be available appropriate two hours after this call through midnight Eastern Time, on March 5th, 2003. Please dial 800-642-1687 from the U.S., or use the international number, which is 706-645-9291. The access code is 7416344. A replay will also be available on our Web site, two hours from now.

Thank you very much.

Thank you for participating in today's Antigenics fourth quarter and full-year 2002 financial results conference call. You may now disconnect.