Agenus Inc (AGEN) 2003 Q2 法說會逐字稿

Good morning. My name is Mandy, 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. 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 ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two on your telephone keypad. Thank you.

Ms. Sripanich, 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 the second quarter of 2003. This is Tanya Sripanich from the investor relations department, and with me today are Garo Armen, Chairman and CEO of Antigenics; Jonathan Lewis, our Chief Medical Officer; Elma Hawkins, our Vice Chairman; and Jeff Clark, our Chief Financial Officer.

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 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 expectations for development programs 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 those projected in the forward-looking statements. Additional information about these risks and uncertainties can be found under the caption "Risk Factors" in the company's registration statement on Form S3 filed with the Securities and Exchange Commission on July 10th, 2003. 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, Tanya. I am pleased to provide an update on the company's progress. First I will review the financial and corporate highlights for the second quarter of 2003. Then Dr. Lewis will report on the clinical program and the progress of our lead clinical candidates, and finally we will open the call to questions.

For the three months ended June 30th, 2003, the company incurred a net loss of $16.6m or 42 cents per share compared to a net loss for the same three-month period in 2002 of $14.1m or 43 cents per share. For the six months ended June 30th, 2003, the company incurred a net loss of $30.1m or 78 cents per share. This is compared with a net loss for the same six-month period in 2002 of $25.6m or 79 cents per share. Revenues for the three months ended June 30th, 2003, were $.9m compared with $.8m for the three months ended June 30th, 2002. For the six months ended June 30th, 2003, revenues were $2.7m compared with $1.6m for the same period in 2002.

Total research and development costs for the three months ended June 30th, 2003, were $12m compared with $10m for the three months ended June 30th, 2002. Total research and development costs were $22.3m for the six months and $18.1m for the same period in 2002.

Total general and administrative expenses for the three months ended June 30th, 2003, were $5.7m compared with $4.9m for the same period in 2002. For the six months ended June 30th, 2003, total general and administrative expenses were $10.5m compared with $9.4m for the same period in 2002. Cash and cash equivalents and short-term investments amounted to $83.7m on June 30th, 2003.

Our business development effort continues to proceed as planned. We're currently in early stage diligence meetings for partnering Oncophage with potential worldwide pharma partners as well as potential partners in Japan and Europe. Our current partnerships related to our QS-21 adjuvant are still progressing and we continue to supply product to our partners, which is a revenue producing effort.

Our research and development team have made progress in this period, not only in the development of new product programs such as the next generation of Oncophage for cancer and AG-707 for genital herpes, but also in refining and improving existing products substantially.

Along with these internal developments over the last quarter and six months, Antigenics has also cultivated external acceptance and outside validation of our ideas and technology. One way, as you know, to achieve this is to increase visibility, and we've increased our visibility considerably in this period. For example, at ASCO we presented five abstracts and garnered an enormous amount of attention from clinicians, investors and the press. The attention we received served to increase awareness and acceptance of our ideas and our technology which has been on a steady rise.

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

Thank you, Garo. I will now update you on our lead programs, Oncophage, AG-858, Aroplatin, and our infectious disease program, and then share with you some highlights regarding recent and upcoming presentations and publications.

I will begin with the progress report on our lead product, Oncophage, in renal cell carcinoma. We have achieved our initial enrollment target and for this trial all patients will be fully randomized within the next two weeks. The trial, which is taking place at 132 centers worldwide and evaluating 650 patients, is one of the most extensive renal cell studies ever done and also one of the largest or potentially the largest clinical trial of any patient-specific treatment that's ever been tested.

Our initial enrollment target has been met and we will continue to enroll patients. This will facilitate our commitment to sites and to patients and will ensure that we have a sufficient number of fully evaluable patients. We remain on track to perform an interim analysis of these data by the end of this year. We are in discussions with the FDA regarding our plan in relation to our regulatory filings.

I will now move on to Oncophage in melanoma and the Phase III trial in [inaudible] melanoma is currently about 37 percent enrolled in 40 clinical centers worldwide. We expect ongoing ramp up of enrollment in the coming months as 25 new clinical sites have recently come on board. It is quite remarkable that there are currently about 160 clinical sites offered worldwide for both of these Phase III Oncophage trials, including sites in the United States, Canada, Europe, Australia, Israel and Russia, and that we have been astonishingly successful in terms of recruiting patients and getting Oncophage to these patients.

I will now review the AG-858 program. At the end of last year, we reported initial data from our pilot study combining a personalized cancer vaccine, AG-858, which is from heat shock protein 70 together with Gleevec for patients with chronic myelogenous leukemia or CML. The patient accrual has continued and updated filings as of that time were presented in an oral session at this year's [Astronmedic]. Based on the data from this pilot study that have signaled anti-leukemia activity, we have initiated a Phase II study evaluating AG-858 in combination with Gleevec, and this is being conducted at leading medical centers in the United States and the United Kingdom.

This [inaudible] trial will rigorously evaluate the efficacy of the combination treatment in up to 120 patients with chronic phase CML who are currently receiving Gleevec treatment but have not achieved a complete [inaudible] response. Enrollment is proceeding on track in this trial, and we have administered our first vaccines to patients. We expect enrollment to complete early next year.

I will now review Aroplatin. We have reached the first milestone with regard to our Phase II study of Aroplatin as a monotherapy for colorectal cancer. This trial, as you know, is being conducted under the supervision of Dan Vonhoff [ph] in Arizona. Seventeen patients have been enrolled and the data have been encouraging enough to continue enrollment of the second cohort of patients. We are opening the trial for other sites to accelerate the rate of enrollment. Interim data from this trial will be presented in a poster session at the European Cancer Conference known as ECCO which will be held in September. Additionally, we continue to enroll patients in a Phase I,II study of Aroplatin as a monotherapy for advanced solid tumors amenable to [DAC] platinum therapy. This study is being conducted at the John Wayne Cancer Center and has currently enrolled 16 patients.

I will now shift gears and review with you our infectious disease program which continues to grow with the expansion of research into additional disease areas. The genital herpes program continues to progress. Based on this AG-702 vaccine in the Phase I trial at the University of Washington, we intend to launch the next phase of our herpes program by filing an IND and begin clinical testing of the multi- [inaudible] herpes vaccine to be called AG-707. This will contain in excess of 30 HSV herpes simplex antigens versus the one antigen that is in the AG-702.

I spoke of expansion in traditional disease areas, and, as Garo mentioned, we have recently received a grant from the NIH to study application of our heat shock protein technology in tuberculosis, and this grant will enable us to expand our research into a disease that has far reaching implications for public health worldwide.

I will now shift gears and speak to you about conference activity, and in May-June of this year we presented five abstracts at ASCO. Data from the AG-858 pilot phase I trial for CML was an oral presentation. As you are aware, the study demonstrated responses in seven of eight patients evaluated, and, as mentioned, this is the basis for the ongoing 120-patient Phase II trial. In addition, we had four poster presentations at ASCO. There was data from the Oncophage Phase II trial in renal cell carcinoma; data from Oncophage Phase II in low grade, non-Hodgkins lymphoma; and then [inaudible] data from a breast cancer study using QS-21; and a Phase II trial, again using QS-21 in prostate cancer.

As for the upcoming meetings, we have two abstracts accepted for presentation at the European Cancer Conference which will be in Copenhagen in September of this year. These will also include data from the Phase I, II trial in pancreatic cancer with Oncophage.

Regarding recent publications, we've remained active and visible in the medical and scientific community, not only through the conferences, but also through publications in some major journals. In the fourth quarter alone, seven papers [inaudible] technology from our own scientists as well as from independent labs have appeared in such prestigious journals such as "Blood", "Cancer Research", "[inaudible] National Journal of Cancer", "The Journal of Cell Biology", and "Human Gene Therapy".

Looking forward, over the next several months we expect to have articles published in key scientific and clinical journals, and "Clinical Cancer Research" will be the next one. We have submitted and are submitting manuscripts to several others as well.

Let me summarize by saying that Antigenics continues to move forward, both in and out of the clinic, and we are reaching several clinical milestones on schedule. That concludes the clinical development update. Thank you.

Thank you, Jonathan. Now, we'll open the discussion to any questions that you may have. Operator?

At this time, I would like to remind everyone, if you would like 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 Corey Kasimov with Ryan Beck.

Hey, guys. Thanks for taking my question. I have a few questions I want to get to here. First of all, with regards to Oncophage and that melanoma study, you say it's 37 percent enrolled now. Any further guidance you can give as to when you expect to complete enrollment and then when we can see, I guess, a first look at data.

I think, Cory, we have said at around year end we expect to complete enrollment, and it's fair to say that, you know, certainly by the end of the first quarter we will have the trial pretty much wrapped up and any data on this will not be available until the second half of next year.

OK. All right, great. And then with regards to 858 and the pilot data that we saw at ASCO, is there going to be more data that's made available with additional patients or is it now just - we'll be waiting on the 120-patient Phase II study?

No. Actually, we have received a request to publish the data from a prestigious publication of the earlier trial. And we're in the process of assembling our data to assess the appropriateness of when and if such a publication will be submitted.

OK, great. Aroplatin. Pending positive data at ECCO in September, in terms of a Phase III strategy in colorectal cancer, is that something that you guys would be willing to initiate on your own, or would that be more contingent on signing a large partner to do a study with a chemo-like agent?

I think it's fair to say that we would certainly be willing to initiate a study for the registration of our Aroplatin on our own. We would also explore potential partnerships depending on the indications that we will be pursuing. Some of the larger indications like colon cancer may be best suited to pursue with a partner, and others we would initiate on our own quickly. So I think over the next six to 12 months, we will fine tune our strategy of what is the most prudent indication and the patient population to go after with regard to Aroplatin. And the current trials will certainly serve to determine some of these answers to the questions.

OK. And then a final question, a financial question. Cash burn - where do you guys stand right now in terms of your - either your monthly or quarterly burn rate?

I will turn it to Jeff Clark, our Chief Financial Officer, to answer that question.

Sure, Cory. The guidance that we've given on our cash burn - our cash burn from operations is a little bit - was in line with what we had last year. As you know, we're in the process of building out our space in Lexington, Massachusetts, and we had about $9.9m in capital expenditures related to that. But for the rest of the year, the expectation is that we will expect to have the cash on hand balance. It's relatively in line with the balance that we had at the beginning of the year.

OK. So that hasn't changed. All right, great. Thank you.

Your next question comes from Mark Monane from Needham Capital.

Hello.

Hello, Mark.

Well, this is actually Mark [inaudible] at [inaudible]. Could you help me understand why the share account [inaudible] by $2m during this quarter?

What's the question again, one more time?

Could you help me understand why the share account increased about 2m shares by this quarter?

OK. As you know, we did an offering in the first quarter and what you're referring to is the increase of shares in a weighted fashion. So the weighted average number of shares in the first quarter versus the second quarter will have increased based on the timing of the offering, and what you're seeing is a reflection of that.

OK, thanks.

Your next question comes from Raymond Meyers [ph] with Bantam [ph].

Hello. Good morning. I've got a question on the [inaudible] Quilimmune-P. You hadn't mentioned that in the development timelines.

Jon, would you like to answer that question?

Quilimmune-P As you know, Ray, has been one of the products that we inherited with the Aquila acquisitions and we generated data about nine months ago and presented this at a major conference and indicated that this is an indication that we would not pursue on our own. We would pursue it in connection with partners. And I think it's fair to say that pending any partnership activity, we will not be pursuing Quilimmune-P as it is not one of our highlighted programs. We have highlighted our four key areas where most of the company's resources are put into, and Quilimmune-P is certainly not within that group. Jon, would you like to add anything to that?

No, I think, Garo, you've articulated that very well. So again, the data from this in older patients are promising in terms of getting us much better immune response. But again, it is not on the first tier of priorities in terms of what we are doing, and in terms of ongoing development, that is something more on the middle burner and will be something that will be done with a potential partner.

OK, good. That's understandable. If I could, I've got three little, picky financial questions.

Please.

Go ahead, Ray.

The first one, starting at the top, is just the revenue breakdown. There was about a million in revenue. How did that break down between the Leucogen and the research and development?

For the three months ended June 30th, Ray, the breakdown of the $955,000 was $922,000 in product sales from the feline leukemia product and $33,000 in research and development revenue.

Great, thanks. And then - this is an important point. Your research and development expenditures, I assume, are going up with - in proportion with your clinical trials, which are progressing nicely. Now that the renal cell trial is reaching full enrollment, will we see a moderation in the growth rate of the research and development or will we [inaudible] along the same track in line with the AG-858?

I think it's reasonable to assume, Ray, that we will moderate in the growth rate certainly of R&D because there was a major ramp up. Even though other programs will make up for the deficit as the renal program matures, we won't see the same rate of increase, notwithstanding any other major programs that we may initiate over the next 12 months.

OK, good. That's helpful. Thank you. And then the last one is - actually, two more. Your non-operating income - how did that break out between interest income and other non-operating income?

The majority of the income, Ray, was other non-operating income related to the sub lease of a number of properties that we have. But we'll have the exact breakout in our 10-Q filing.

And these sub-leased properties have been the result of our inheriting them from two acquisitions that we made - Aquila and Aronex.

Right. And then a final question is related to your cash burn. Your cash burn is slightly higher than your operating - or your net loss in the quarter. It looks like you may have paid off some debt or prepaid expenses or something like that?

Ray, are you calculating cash burn including capital expenditures?

Yes.

Right. So, like I said earlier, the cash burn is higher - abnormally higher, if you look at prior quarters - in this quarter as a result of the construction project that's ongoing at our Lexington facility. But we had about - through the six months ended June 30th, 2003, we've invested about $9.9m to date in that facility and you don't see that come through our next loss because those expenses are capitalized.

Great. And what was it in the second quarter?

The amount invested in the second quarter?

Yeah.

It was - the majority of that was invested in the second quarter. We started the construction project in March, late March, so...

Right. OK, that's very helpful.

And just to provide color on that, we said - we estimated the cost of that project to be around $16m and we're right on target, both in terms of timelines as well as the projected spending.

Excellent. Keep it up. Thank you.

Your next question comes from Ren Benjamin from Rodman and Renshaw.

Good morning. Congratulations on your ongoing developments.

Thank you, Ren.

Can you take us through the end points of the Phase III trial that's coming up? The renal cell Phase III has completed enrollment. Can you take us through what we're going to be looking for at the end of this year, what improvement you guys would find as satisfactory and statistically significant?

OK. We haven't quantified the statistics, I believe, but, Jon, if you could take a crack at the question, I'll comment if needed.

Sure. So, Ren - yeah. We've not released that information publicly regarding the statistical plan as it stands for this year. The renal cell trials, the end points are time to progression or time to recurrence and survival, and in terms of what we're looking for is a difference between the control group - these are patients who are getting the [inaudible]. We're projecting a recurrence rate of 40 percent. So in other words some 60 percent will remain disease free. We're looking to change that to 75 percent in the group that are getting Oncophage. And that's the ultimate statistical analysis on this.

Now, as regards the interim analysis, that's going to be done, again, by the end of this year. We've set that up in a way where we have a very stringent P value of 0.005 and again we're looking for that difference in the interim without having any impact on the final analysis which is going to be 0.05. Does that address your question?

Yes, it does. Thank you. Thank you very much. One additional question. How are the partnership talks going? You know, what would be an ideal partner for you? And it seems like - I mean you have such an abundant pipeline. What products are you willing to partner or what products do you want to keep to yourself?

Sure. Let me answer that question because, as you know, in the past we have been asked the question of partnering strategy numerous times, and as of the end of last summer we put together a substantial in-house effort with the arrival of a VP of business development to pursue these opportunities. And I must tell you, to my surprise there has a been a substantial amount of interest by some of the larger companies in personalized medicine, specifically Oncophage. And the reason I say "to my surprise" is because we thought when we started this process that our non-personalized products would be more appealing to the large partners who have traditionally been more in line in terms of their business development efforts with the idea of off-the-shelf product strategies.

So we have had serious discussions with half a dozen partners. Some of them are - in fact many of them are large, household names. And they have completely overcome any prejudices regarding personalized medicine, which was not the case several years ago. Several years ago, the concept of personalized medicine was a very difficult hurdle to overcome among large companies. But that is not an issue certainly among the major pharmaceuticals that we have had discussions with in the last year.

And several of these partners are what we call in the third inning or - I'm sorry. I shouldn't say - between the third base and home base in terms of the progress we've made with them. And the idea of partnering would be - for any of Antigenics' products, assuming that we are a true partner. As we've always said, Antigenics is eager to establish a North American oncology franchise. That has not changed. And in the spirit of partnering, we will retain the integrity of our commercial plans in terms of being players in the North American oncology market.

Regarding global strategy, it would be more prudent for us to hand over the product and be a partner that receives royalties perhaps, or a share of the revenues and profits as opposed to being in the commercial marketplace ourselves in the field of oncology.

With regard to infectious diseases products or any other product in the portfolio, our global partnership strategy is one of licensing out certainly the initial several indications because we do not possess the in-house expertise in the fields of infectious diseases from a development and commercialization perspective as we do in oncology. Does that clarify?

Yes, very well. Thank you very much, and congratulations again.

Thank you.

Your next question comes from Patrick Schnegglesburg [ph] from Meta Partners.

Yes, hello. Thanks for taking my questions. A quick question for Jeff. Your FDSOs - at the end of everything said and done, what is the number there, please?

What was the first part of the question, Patrick?

Your fully diluted shares outstanding, after everything is said and done - I guess you had some - you were talking about that earlier.

Today, the fully diluted weighted average - or fully diluted shares outstanding?

Yeah.

It's about 39.4m.

30.4m. OK, thank you.

39.4.

Oh, 39. OK, great. Then one broader question, I guess. It's an interesting point you bring up, that your larger discussion partners in the pharma industry are becoming more appreciative of individualized medicine. Why is that? I guess from a clinical point of view there have been some pretty positive results. One could, however, argue that the economics still have not been worked out and I would actually be somewhat surprised that a very large pharma would be interested in that.

Well, as you can imagine, before any of these partners get to the third base a lot of these issue have been addressed. One of them, as you appropriately bring out, is the economics issue. I think we have done an exhaustive study to demonstrate the cost of goods sold in our personalized medicine, all inclusive, if you will, cost of goods sold versus what it would be for a traditional biologics product. The traditional biologics product has typically - cost of goods sold in the range of 15 to 30 percent. And to the satisfaction of many of the partners, we've demonstrated that we anticipate ours to be in the range of 15 to 20 percent.

The reason for that is in spite of the fact that we're a personalized medicine company is the following. Our variable costs are clearly higher because handling personalized product is costlier than handling an off-the-shelf product. However, our capital costs, our fixed costs, are considerably lower than a traditional biopharmaceutical that requires a fermentation facility. And in fact the ratio is 10:1. We're about one tenth roughly of the capital costs as a traditional biologics facility such as an antibody facility. And so the blended costs come out to be certainly in the lower range of the biologics we own.

In addition to that, also you may see in our case that we do not have any onerous royalty obligations that generally are factored into the cost of goods sold for some of the larger products like Enbrel. And so that also helps us.

OK. And so to some extent, while that might not entirely apply to you, if the - net/net, i.e. on the bottom line with respect to potentially a not-so-large market that you might have in individualized medicine, the argument is still in favor of you and that's primarily based on your cost reduction or...

So is your question that the product may not have a large potential but the cost of goods will favor us? Is that it?

Well, somewhat. I guess my - at least assumption is if medicine is individualized, automatically your market becomes narrower, and hence as a pharma I would say, "OK, does - where is my sweet spot?"

Sure. Sure, I hear exactly what you're saying. On one hand, I think the traditional so-called personalized medicine approaches that are targeting the development of a product that targets a narrow patient population within a disease category - in that case, you would be correct. In our case, it's an individualized product. The narrowest you can get. But the potential applications, though, of this product are quite large. In fact, one specific pharma partner that we are - potential pharma partner that we're negotiating with has termed the opportunity as being a very substantial blockbuster opportunity, should we show efficacy.

Agreed. Completely. All right. Thank you so much.

Your next question comes from Pasquale Bezman [ph] from UBS.

Hi. Good morning, guys.

Good morning.

Could you do me a favor and go through how you expect to see enrollment of the 858 trial in the Gleevec setting in terms of patients and centers, and what level of enthusiasm you've seen at this point, and the range of expectations of when we could expect news and/or data, please?

Yes. Pasqaule, let me go after a few things. So first, it's currently being done at greater than 10 centers in the U.S. and in England. These are the major CML centers around the world. In other words, the centers with the highest volume of patients with CML and the investigators are the leading figures in this disease. We have seen a tremendous amount of enthusiasm from those that are operational up until this point and that includes the two PIs, if you will, of this study. That's Brian Gruco [ph] out of Oregon and John Goldman [ph] out of London.

And so based on what you've seen there, based on what we're projecting again with all the other sites, we expect enrollment to be done somewhere in the first quarter-- first half of next year. The time to analysis of data on these patients is fairly quick, and the reason for that is that we have a very rapid readout in terms of measuring a chromosomal and molecular response. And so from the time of enrollment to the time that we get final data on these patients it's on the order of - somewhere around about six to eight months, and in fact from the time of first treatment, within six months we'll have final data on these patients. So we expect to have, again, a very good sense of data, potentially final data, by the end of next year, the end of '04.

Thanks a lot.

Your next question comes from Joy Michelle [ph] from CCL Partners.

Hi, good morning. It's Joy Michelle [ph] from CCL Partners. I just wanted to ask - regarding the multivalent herpes vaccine, when did you expect to file that IND?

The plan is to file that IND around year end and to start clinical trials of the AG-707 multivalent vaccine certainly in the first half of next year.

Great. And then I just wanted to clarify - I think I just missed it - the Phase II in Aroplatin - Aroplatin in colorectal cancer that 17 patients were enrolled in. I'm sorry. Did you say that was a monotherapy or a combination therapy trial?

Right. The current trials so far have been monotherapy trials. And as you know, the most efficacious outcomes with platinum analogs have been in combination trials. So the results that will be presented at ECCO this fall will be strictly based on monotherapy. And we have said publicly in the past that we have been encouraged with the monotherapy results, enough certainly to go with combination therapies which should produce more efficacious outcomes. And we're aggressively now moving into trials with combinations that have historically demonstrated efficacy with platinum analog.

Great. And then just one last question. You used to talk about a second central Phase III in melanoma, I think potentially in earlier stage patients. And I was just wondering if that's sort of still the plan or if you're not planning to do that anymore.

Very much so, and I'll let Jon give you a little bit more detail.

Right. So that's very much still the plan. We're in the final stages of the protocol development. This is going to be run by a large cooperative cancer group, and as you said, it's going to be the patients with earlier stage disease and that's going to be Stage III disease. And again, we expect to give you more news on this, on starting the trial by the end of this year.

OK, great. Thank you very much.

Your next question comes from Mark Monane from Needham Capital.

Please.

Sir, you may proceed with your question.

Thanks very much. Good morning. A couple of quick questions and one longer one. I might have missed this - I apologize. For the two presentations at ECCO, can you go over what - can you describe what those programs will consist of?

Yes. The first is going to be the data from the Aroplatin study being done under the supervision of Dan Vohoff [ph]. And that will be a poster presentation. The second will be the final analysis data on pancreatic cancer treated with Oncophage, and again, that's a study that had been presented from [inaudible] at ASCO for the interim analysis, if you will. And more patients have been treated and we now have very long follow ups on those. And that will be a fall presentation, and I will tell you, without getting into too much detail, it has been highlighted or selected to be highlighted at that meeting.

Terrific. OK. Second question is could you please describe the state of the art of the Lexington facility? How is the building going and what are the plans for that center?

OK. You missed Mark, but I'll be happy to mention it quickly. As you may remember, we had indicated that the facility would be - with a budget of about $16m and that it would be completed this fall. We are exactly on target with the amount to be spent, the total amount to be spent, and we expect completion in the September through November timeframe in stages, meaning that we will start moving into the facility in September and complete our move by the end of November.

Got it. And that will be - will that - and that will replace the Woburn facility?

That will replace the Woburn facility in its entirety, and the advantages of the Lexington facility are that its rent is $10 a square foot. We have - with 10-year renewals up to 30 years of stay in that facility, if you will, with 3 percent rent increases per annum. And in addition to all of that, we have substantial expansion space over we what would at Woburn, which was nothing. And the nice thing is that we don't pay for the expansion space until we occupy it, essentially. So those are among the features. It will allow us to potentially more than quadruple our manufacturing capacity here in Woburn with a reasonably modest incremental capital expansion.

Oh, very good. Terrific. And last question, please. Can I ask you to step back and give us your opinion of the state of the art of cancer vaccines at this time? We have a new FDA commissioner who has made a case for improving or speeding up the approval times where there's a novel therapy. Where do you see cancer vaccines in their development right now? And then talk a little bit, please, about the regulatory environment for such a vaccine.

Sure. Let me take this one at a time. Certainly we have two unique attributes. One is that we have a very novel technology which is scientifically extremely well elucidated but it is a novel technology. Secondly, it's a personalized medicine. Both of which constitute challenges in terms of both practical implications, regulatory implications, manufacturing, cost of goods, as we discussed, and so on and so forth. And I think it's very important that we, along with the FDA and others, work in a cooperative fashion to move such programs forward, because certainly all the rules and regulations that govern traditional products need to be somewhat reformed in order for them to apply to a new set of products. And I think so far we've worked with the agency in order for us to be able to acquaint them with the nuances, and this has been going on - it's an ongoing process for the last five to six years - nuances of our science, our technology, and so on and so forth.

In terms of the regulatory environment, historically we have tried not to assume too much and tried to be as conservative as we could, but I think it's fair to say that we are - and when I say "we", I'm talking about companies, the medical community, as well as the regulatory agencies, are learning a great deal on how to evaluate new products, what kinds of effect to watch for and how to use some of these products, either alone or in combination with synergistic candidates. And I think over the next several years, you'll see a lot more that will be driven by science and data that will allow us collectively to be able to better evaluate the efficacy of these new generation of compounds.

Very helpful. Thanks for the clarification, and congratulations on your progress.

Thank you.

Your next question comes from David Sandler [ph].

Good morning, Dr. Lewis. I had a couple of questions regarding Gleevec as it affects the 858 program. My first question is what is your latest understanding of the duration of the efficacy of Gleevec? Number two, I wonder if you could explain how you define what it means when a patient fails Gleevec. And last question, I wondered if you have any data concerning the percentage of patients who have been on Gleevec who fail Gleevec and actually enter the last phase of CML.

Thank you for your question, David. The general answer to your questions is that these are all data points that we are learning right now and we really are learning a lot at this point in time because a significant proportion of patients who've been on Gleevec are beginning to fail. And so going through the questions two and three that you asked in terms of how these patients are failing and what percentage, we don't have an exact answer for that. The best sense we can get is from the large investigators and people who treat a lot of patients that have been on Gleevec, and it would seem that it's likely going to be at least 50 percent of patients that will ultimately in some way, shape or form fail Gleevec therapy. That does not include the initial proportion who do not respond to first line therapy with Gleevec. But again, that data is not hard and fast. It's something that we're learning right now. As the year and the years go by we'll get a much better handle on that.

The first question you asked was regarding the duration of therapy. And again, with that, the way that we've designed the Phase II trial is that patients will need to have been on Gleevec, and a stable dose of Gleevec, for a period of 12 months. And I think that that is a widely accepted definition certainly as a trial that was set up by the experts, the people who developed Gleevec and have by far the best understanding. And so as regards that, I mean we've said we've set the Phase II trial up in an extremely rigorous way in order to be able to discern with a very high degree of confidence the Gleevec effect, the failure from Gleevec and then the effect of our vaccine.

Any other questions?

There are no further questions at this time.

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