Agenus Inc (AGEN) 2004 Q1 法說會逐字稿

I will be your conference facilitator today. At this time, I would like to welcome everyone to the financial results and recent highlights for the first quarter of 2004 conference call. [OPERATOR INSTRUCTIONS] At this time, I would now like to turn the call over to Jack Howarth, Head of Investor Relations of Antigenics. Please go ahead sir.

Thank you and good morning everyone. Welcome to Antigenics’ conference call to discuss our corporate and clinical progress as well as our financial results for the first quarter of 2004. My name is Jack Howarth and I've recently joined Antigenics as Head of Investor Relations.

With me on today's call are Garo Armen, Chairman and CEO of Antigenics, Dr. Renu Gupta, our Senior Vice President, Development and Jeff Clark, our CFO.

We hope that all of you have had a chance to review a copy of our press release that was issued this morning. We will review these results as well as highlights of the past quarter in this call, and then open the call up for questions.

Now before I turn the call over to senior management, 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.

Please see the disclosure under the heading "Factors that may impact future results in the management's discussion and analysis of financial condition and results of operations" section of the Antigenics annual report on Form 10-K, for the fiscal year ended December 31st, 2003, for a more complete discussion of these and other risks factors.

Antigenics cautions investors not to place considerable reliance on the forward-looking statements made on this call. These statements speak only as of the date of this call, and Antigenics undertakes no obligation to update the forward-looking statements made on this call.

I will first turn the call over to Jeff Clark, our Chief Financial Officer, who will review the financial results for the last quarter. Then Dr. Gupta will report on our clinical program and the progress of our lead clinical candidates. And then Dr. Armen will discuss our recent corporate highlights. Finally we will open the call for questions.

I'd now like to turn the call over to Jeff Clark. Jeff?

Thank you, Jack and good morning to everyone.

For the three months ended March 31st 2004, we incurred a net loss attributable to common stockholders of 17.4 million or 41 cents per share. This is compared with a net loss attributable to common stockholders of 13.5 million or 36 cents per share for the same period in 2003.

Revenues for the three months ended March 31st 2004, were 447,000 compared with 1.8 million for the three months ended March 31st 2003.

The 447,000 of revenues for this quarter are comprised of approximately 338,000 of FeLV product sales to Virbac, prior to the closing of the sale of that business, and approximately 109,000 of R&D revenues.

Total R&D expenses for the quarter ended March 31st 2004 were 11.1 million, compared with 10.3 million for the same period in 2003. And total General and Administrative expenses for the quarter ended March 31st 2004, were 6.3 million, compared with 4.9 million for the same period in 2003.

Cash, cash equivalents and short-term investments amounted to 132 million on March 31st 2004. This balance includes the proceeds from the follow-on offering of common stock that we completed in February.

In addition this balance also includes approximately 10.4 million in proceeds from the sale of our manufacturing rights for the feline leukemia virus vaccine to Virbac, which we announced in March. And under the terms of the agreement with Virbac, they will pay us the remaining 4.25 million of proceeds upon the earlier of –- one, their successful production of an initial manufacturing batch of the FeLV product; or two, eight months from the date of closing. The transaction is also subject to the transfer of USDA product licenses to Virbac. And based on the feedback we have received from the USDA, we expect that to happen imminently.

As you know, the FeLV Vaccine product was our only current source of product sales revenues. So with the sale of this business, those product sales will obviously go away.

And one final comment on this transaction is that in anticipation of the deal closing, we did not produce any FeLV product during the first quarter, which resulted in approximately 570,000 dollars of idle overhead costs associated with the facility, the majority of which are captured in our cost of sales account on the statement of operations. So that's what's driving this somewhat unusual presentation of cost of goods sold in excess of revenues.

This concludes the financial portion of the call. And I will turn it over to Renu now to continue.

Thank you, Jeff. Good morning, everyone.

Today I will update you on the status of our clinical programs, beginning with our lead product, Oncophage.

Oncophage, as we all know is our lead product for renal cell carcinoma and melanoma. We continue to treat patients in our Phase III trial for renal cell carcinoma. As you well know, this is the largest randomized control trial to date conducted for patients with kidney cancer in the adjuvant study. At present we have randomized 650 patients who are eligible and expect to have data for final analysis as early as the beginning of 2005.

We're also in the midst of preparation for discussions with the FDA regarding our Phase III clinical programs. Specifically we are working to provide our next packet of information to the FDA, in advance of the Type A meeting, we expect to have with the Agency, as part of our effort to discuss overall product registration strategy.

The Agency thus far has had the view that Oncophage is not sufficiently characterized to support product registration. Over the next several weeks, we will submit data to the FDA to support that Oncophage is well characterized.

In addition the FDA has provided us with detailed comments and guidance regarding both of our Phase III trials. We have addressed some of these issues and will be addressing the remaining issues in the package to be submitted to the Agency for their review.

Additionally we are assessing opportunities for studying Oncophage in combination with other molecules for treatment of metastatic kidney cancer. At present, we are enrolling patients in a Phase I/II study of mono-therapy with Oncophage, in the same indication. We expect to enroll the target 40 patients by year-end.

Our second Phase III trial of Oncophage is in Stage IV of metastatic melanoma. Enrollment in this trial has substantially accelerated since the listing of the partial clinical hold in November of last year. The current enrollment in this trial is approximately 250 patients. And we expect to complete enrollment by the end of the third quarter of this year.

In addition we are planning a study of Oncophage in the adjuvant study in patients with Stage III melanoma. This study will be conducted by the EORTC, a European cooperative group for research and treatment of cancer, and a North American cooperative group.

In addition to our two Phase III trials for Oncophage, we have efforts underway in other indications. A Phase II clinical trial of Oncophage in lung cancer was recently initiated at St Thomas' Hospital in London. Target enrollment for this study is 20 patients. And we expect to achieve this by the end of this year. The study will continue for three years after all patients are enrolled in the study.

A Phase II trial in breast cancer is also planned. And we are working with key opinion leaders to design an optimal clinical program for this indication.

At this time I will now review our second lead molecule in cancer, AG-858. As you all know, last year we initiated a single arm Phase II study to evaluate AG-858, in combination with Gleevec. We have enrolled approximately half of the 40 planned patients for this trial and expect completion of enrollment in third quarter of this year. Preliminary data from this trial will be available towards the end of the year.

At the moment we are looking to defining our path to registration for AG-858, and plan to discuss our development program for this molecule with global regulatory agencies in the coming months.

Now I will briefly review our Infectious Diseases Program. Again, as we've stated before, AG-707 is a multivalent heat-shock protein vaccine being developed for the treatment of herpes simplex virus 2 infection, also known as Genital Herpes.

A pre IND meeting with the FDA has been scheduled for mid-year, and thereafter we expect to initiate a multi-center Phase I trial for AG-707. And we expect that to happen before the end of the year.

You also know that we have a Phase I trial of the monovalent AG-702 vaccine, which is being conducted at the University of Washington in Seattle. And we expect to have initial data at the end of this year.

So this is our effort in, or key effort in our heat-shock protein technology platform for cancer and infectious diseases.

In addition, as you are all aware, we have Aroplatin, which is our liposomal advanced platinum compound, has been studied in two Phase II trials, and data has been previously presented at ECCO last year, and from our colorectal study was presented at the ASCO-sponsored GI Symposium in late January this year. And presently we are investing our efforts in optimizing formulations and preparing global development plans for this molecule.

Conference activities which are targeted for this year are as follows.

Antigenics has had two abstracts accepted for poster presentation at the upcoming ASCO meeting to be held in New Orleans at the beginning of June. The first abstract from the University of Connecticut presents immunological data from the pilot trial of HSPPC-70, for the treatment of CML. And data -- clinical data from that trial has been previously presented at ASCO and ASH last year.

The second abstract presents data from a Phase II study of Oncophage in combination with GMCSF and interferon alpha in patients with melanoma, being presented by Dr. Giorgio Parmiani from the Cancer Institute in Milan.

And this quarter, Antigenics will be an exhibitor, and will host a series of breakfast symposia, at the American Neurological Association Meeting to be held in San Francisco in May.

In summary, we continue to focus our efforts on the development program, which will enable successful registration for Oncophage, while defining the clinical activities required for developing an optimal portfolio for our heat-shock protein technology.

Additionally we're investing in optimizing the formulation of Aroplatin for its successful development and commercialization.

This concludes my update and I thank you very much for your time.

Thank you, Renu. This year marks an important period of activities for us, which are both necessary and critical for the registration and commercialization of Oncophage.

Given the novelty of our product, our technology and our manufacturing related activities, we expect registration and commercialization issues and challenges to be non-trivial. But we also expect that because of the completeness of our science, and our understanding of all of these issues, and the expertise we have built over the years, we will be successful in our efforts, that the coming year will be both very exciting and very challenging.

Let me start with a quick review of where we are, or more to the point, what we're focused on. Building on the momentum of last year, including the listing of the partial clinical hold and positive interim analysis in our renal cell carcinoma trial, we have continued to focus our efforts on how to bring Oncophage to the market in the shortest possible time, provided that of course, that our expectations of positive results from our clinical trials is borne out.

For kidney cancer patients in our trials, there are no treatment options available. A treatment that shows clinical benefit and has a favorable safety profile would be considered a major breakthrough in addressing an important un-met need.

In addition to the intense regulatory efforts described by Dr. Gupta, we're getting ready for a potential ramp-up of our manufacturing requirements. In this regard, we have completed the built-out and the move to of our Lexington facility, which is intended to be for commercial launch for Oncophage. This has been accomplished on time and in line with our budget for the project.

To briefly review our total costs associated with the Lexington facility -- which, by the way, includes research, animal testing, development, clinical, regulatory, manufacturing and related activities, as well as commercial, business development, finance and administration functions on approximately 100 square feet of space. All of this was done for approximately $17 million and it was completed in less than one year. That includes the move to the facility.

We continued to simultaneously prepare Oncophage for the market and also to prepare the market to receive Oncophage. As you know, we have joined efforts with the Kidney Cancer Association recently in a campaign to promote awareness of kidney cancer. We have initiated a speaker program to target our primary customer base and have formed a formal speaker bureau for Oncophage.

On the business development front, we are currently in various stages of discussions with 7 of the top 13 pharma companies - oncology pharma companies. We also have 2 multi-drug collaborations with leading oncology pharma companies and 1 clinical collaboration with a major Japanese company. In addition, we continue to leverage our non-core assets through our licensing as well as outright sale. We also continue to aggressively expand and protect our patent portfolio.

We have strengthened our balance sheet through a follow-on equity offering, which was completed in February and which Jeff mentioned previously. This offering, along with the sale of our feline leukemia vaccine manufacturing rights to Virbac provides us with ample cash to see us through this next, most critical period of development.

Let me now outline what you may expect over the next several months from us on the product side. We expect that the final data from our Phase III renal cell carcinoma trial, will be available as early as the beginning of 2005. We will also complete enrollment of our randomized Phase III melanoma trial. And we expect results from this trial will also be available as soon as the first half of 2005.

We will see data from our Phase II trial of AG-858 for CML patients in combination with Gleevec. We will file an IND shortly and enter the clinic with our multi-valent (ph) AG-707 therapeutic vaccine for the treatment of genital herpes. In addition, you will see substantial progress with other products in our portfolio, such as Aroplatin and ATRA-IV for the clear development strategy for a potential product registration.

In summary, we have 3 products which are born out of our heat shock protein technology in clinical trials today. We also have 2 additional products, which have come to us through acquisitions, which have potential for promising clinical profiles. In addition to this, we have advantages of technologies, which offer a very fertile portfolio for exploration.

Our focus is cancer as well as immunology. And this has not changed since inception. I will now end our formal remarks and take any questions that you may have. Operator? Is our operator --? Could you review the questions and answers procedure?

[OPERATOR INSTUCTIONS]. Thank you. Your first question comes from Bonny Sellman (ph) of Castle Creek Lifescience.

Good morning. Could you please go over again exactly what's going to be presented at ASCO? That's my first question.

And my second question revolves around your data in combination with Gleevec. Is there any more color you can give me relative to the specifics of that trial? Whether the Gleevec is high-dose or low-dose and other details. Thank you.

Hello. This is Renu Gupta. Thank you for your questions. The 2 abstracts which have been accepted for presentation are as follows. One is the abstract submitted by Dr. Zee Hi-li (ph) from the University of Connecticut School of Medicine, which is based on heat shock protein 70 based vaccine simulates both innate and adaptive immunity against chronic myelogenous leukemia.

We can certainly provide reference to where this might be available. And this is the follow-up from previous clinical data that was presented at ASH and ASCO. And in this particular abstract, Dr. Zee Hi-li will be presenting data related to immune response studies done in these patients who -- who have CML, who have previously received Gleevec or are given Hsp70 vaccine. And then are examined for generation of intereron gamma producing T-cells in response to the administration of the vaccine.

And so, that is the abstract which will be presented in a poster presentation. In addition to that, there is a manuscript in preparation for -- to be submitted in the coming couple of weeks to a lead journal. Again, data based from the heat shock protein 70 based vaccine in the study of patients with CML.

The second study which has been -- the abstract of which has been accepted for presentation is a study conducted by Dr. Parmiani (ph) at Alf (ph), which is a Phase II study of Oncophage in combination with GMCSF and interferon alpha in metastatic melanoma. And again, in this study, this is also a follow-up study, where Dr. Parmiani and his team have evaluated the response of Oncophage – the host immune response of specifically T-cell responses to melanoma being elicited by the administration of Oncophage.

And he has in this abstract -- again, this is available and we can provide the reference for that. He has concluded in his results, that the addition of GMCSF and interferon alpha at the specified dosing schedules do not add to an intensement of the T-cell responses beyond what Oncophage has been able to elicit as mono-therapy.

Thank you. Your next question comes from Mark Monane of Needham & Co.

Good morning. Thank you for taking my question. Could you please start -- a concrete question on the characterization issue that was brought up earlier in the call. The FDA, I know, had clinical hold, which was lifted pretty promptly. I was wondering what the leftover items are in?

OK. Mark, do you have another question or shall I go with --?

The other question is -- thank you, Garo. The other question is please, if you could talk about -- there are a number of companies developing different products for renal cancer. And it's likely that vaccines will be used in combination with other therapies. Can you talk about how you envision that vaccine being used?

Sure. Let me tackle the first question. As you know, the product division of the FDA put us on clinical hold that Mark was referring to last October or September. And it was lifted very promptly because we were able to convince the agency that we have developed a potency assay, among other things, but to highlight the potency assay.

And the agency bought into the potency assay that we were to do in order to demonstrate the fact that Oncophage is a well-characterized product. Now since then, we have put all of the effort into place to actually run this potency assay on samples that have been collected from patient products in our Phase III trials, that includes both renal cell carcinoma and Melanoma.

And until the potency assay results are made available to the agency and the agency accepts the retrospective testing of these (indiscernible), we will not have had a fully characterized product. We expect that we will complete the testing in the next month or so and we will submit the results to the agency and will meet with the agency beyond that to present our case for the acceptability of retrospective testing. So that's the product characterization issue. So until we go through the process, even though we're both clinical hold, our product will not have been fully characterized.

And the goal is to have it fully characterized before the ...

Before the submission of any application with the agency. And there are possibilities that we may not be successful obviously in our efforts to do this, but we feel confident that because of the scientific attributes and everything else that we have in place, we feel confident that we may be successful.

The second issue was the vaccine to be used in combination with other therapies. As we said earlier, this year also marks a very significant effort by Antigenics to explore combination of Oncophage with other biological agents, as well as chemotherapeutic agents, for which we have a strong rational to have a combination treatment protocol for patients.

We're right now going through the pre-clinic experiments to substantiate the rational with some of these combinations. And we're also getting ready to enter the clinic directly in situations where pre-clinical experiments do not make sense or do not shed any more information because of the limitations of the biological target differences in humans versus animals.

The rational for us doing this is the following - while we have opted for a development strategy for registration with Oncophage as mono-therapy in typically stage 3 patients or the equivalent of stage 3 patients, we believe that to improve the efficacy of our product for what we have seen in Phase II trials, in stage 4 patients, a combination strategy is very sensible. Because such combinations may help us lower both the tumor burden as well as help the immunological issues that relate to the activation of the immune system via the use of Oncophage. So, with that you will see some initiatives over the next 6 months with regard to definition of clinical programs that will use Oncophage in combination with other agents.

Renu would you like to add anything to that?

No, I think you've captured it quite nicely. Thank you.

Thank you for the added information.

Thank you. Your next question comes from (inaudible) of Broadband (ph).

Good morning. Thank you for taking my call. Garo, just for the FDA meeting that you're going to have, would you discuss the AG-858 strategies in the same meeting with the FDA?

Hello, this is Renu again. No, our plan is to discuss AG-858, which is a different IND in the coming few months after our meeting related to Oncophage.

OK. On the RCC trial that's ongoing, would you please give us a breakdown of the patient in roman number starting from 01?

OK, so we have now randomized 650 eligible patients in that trial and by an intent-to-treat prospective, we have over 730 patients randomized to date. And were you looking for a breakdown by year?

I think what I was trying to get is, by the time when the trial was put on hold and then (indiscernible) listed, how many patients enrolled by that time and how many patients where you are doing the retroactive analysis actually fit the profile in terms of purity, potency as recommended by FDA regulations?

Right, so, at the time that we were put on hold, we had about 627 or so patients randomized at that time. And these are eligible randomized. We, perhaps, have an additional 60 or so by intent-to-treat analysis.

OK, thank you.

You're welcome.

[OPERATOR INSTRUCTIONS]. Your next question comes from Bill Slattery of Deerfield Management.

Guys, thanks again. In the event that the type A meeting results in continuation of the agencies' discomfort with the characterization of Oncophage, what is the contingency plan? How do you then either convince the agency that they're incorrect in their assessment or what do you do in order to present an alternative product strategy to them - maybe one that's a bit more straight forward in its characterization? Thank you.

Sure. I don't think we would characterize the agency’s stance on any of these issues as being incorrect. In fact, the agency is absolutely within its rights to require what they require of us. Let me, perhaps, for the sake of making all of this more understandable, divide the issues that have been raised by the FDA into 2 buckets -- 2 separate buckets.

1 bucket would be all issues that relate to product characterization. OK? And the second bucket relates to everything else beyond product characterization. Now if we take the second bucket through our internal resources, and external resources, we feel confident that all the issues in the second bucket are addressable, have already been addressed, but the data has not yet been provided to the agency, or we're in the process of addressing it, and we have a high level of confidence that they will be addressed to the satisfaction of the agency.

As far as the product characterization bucket is concerned, there are two issues there. One is the acceptability of the product characterization parameters that we have set forth, which have been, by the way, accepted by the product group of the FDA, OK? We have some final details on the testing still being worked out. But by and large they have been accepted. So we do not see any risk, basically, associated with the validity of our approach to product characterization, which has already been blessed by the product group at the FDA.

The second issue there is the acceptability of retrospective testing by the agency. And so that is the only major issue that we face going forward, in terms of convincing the agency of the fact that we have a well characterized product and that the retrospecting -- the retrospective testing does not take anything away from the characterization of that product.

And we believe that our position certainly -- and we don't want to be presumptuous that this should be the position necessarily of the agency -- but our position is that if the results from our trials are robust (ph) and if this is the only remaining issue that we should reasonably be able to work this out to the satisfaction of the agency. But that's a presumption that we make.

Garo, I appreciate that and I certainly hope that that is how things play out. I was curious -- what are the contingencies in the event that retrospective characterization is not accepted, how do you then move forward?

If that were to be the case then we would have to count patients starting from the time when we started doing the testing prospectively, which would be last November -- the end of November, and we would have only approximately 100-some patients in that category.

Would that be satisfactory for registration requirements?

We believe under the current FDA regulation, with no exceptions requested from the agency that should satisfy the agency issues.

OK, thanks for explaining that.

Thank you. Your next question comes from Jason Kantor of W.R. Hambrecht.

Hi, thanks for taking my question. I want to dig down a little deeper. Is there any way that you could tell us -- give us some sort of explanation of what exactly the potency assay is? Also, are there any other characterization issues that are outstanding such as purity and sterility, et cetera And maybe we can just leave it at that.

Sure. Let me -- This is a very good question because it will allow us to be able to reflect why we did not do the potency assay prospectively, why did we do it retrospectively.

But to answer your other question, there are no other issues such as purity, or sterility or anything like that. In fact, those issues were not even issues at the time we were put on clinical hold. And the FDA at that time stated to us, they had no safety concerns associated with the product. That one of -- the major issue was product characterization, led by potency.

Potency is a test that is a measure of the biological activity of the product. As you may know, vaccines do not result in blood levels of the agent that you are injecting into the body. Vaccines work in a catalytic fashion to ignite an activity within the immune system.

So thereby, you cannot get blood levels of the products you've injected. So we have had to discover from scratch, some tests that we would then be able to convince the agency would suffice for the potency, or demonstration of biological activity, as a surrogate of our product. And it took us some time to develop this test.

Certainly if we had an off the shelf test, like many companies have the luxury of enjoying, we would have done this prospectively some years ago, when we started the clinical trials. So we had a choice of going on a path of retrospective testing, and developing the valid potency test that would be acceptable to the agency.

This was presented to the agency at the time, or before they lifted the clinical hold. Or we had the choice of putting all these development programs on hold, and work on just the potency test for two, three years, and then start our Phase III program right then.

And we opted for the first option because we thought, based on the data, and based on the scientific rationale, it would be irresponsible of us to wait the extra two, three years, in order for us to have the potency done prospectively.

So that was the rationale and that's why we're dealing with this situation right now.

Thank you. At this time you do have a question from (technical difficulty) of Detrosse Capital (ph).

Hi there. Thanks for taking my question. I just wanted to ask, in general, what is the shelf life of a vaccine, and how much potency would you expect to deteriorate over time?

OK. The shelf life of the vaccine, based on our laboratory experience, is several years. OK? However, we are -- for clinical purposes, from a regulatory perspective, I believe it's about a year -- Renu?

Yes.

It's a year. Okay? So that's a validated shelf life.

Now, we do not expect much deterioration in the potency of the product, because of the way we store the product; it is stored frozen. And based on our preliminary feasibility studies that we have done, we expect that from a potency testing perspective, that there should be no deterioration, from an activity standpoint, of any of our products.

So is the concern regarding retrospective testing -- does that have to do more with the question of whether a specific sample could be identified in the past, or whether the product as you look at this now, is in the same form as it was when it was administered to a patient in the past.

OK. I think both of these are relevant issues and we have very rigorous internal processes and controls to validate that the (indiscernible) that we had collected indeed belong to the patient, for whom it's relevant to test.

And in terms of the second issue that you raised, one can presume that the retrospective testing would scientifically not be appropriate, if the product does better over time. Because if the product certainly got worse, that's a cost to Antigenics.

In other words, it would basically render the product not potent, and that product would have to be excluded, or the patient would have to be excluded from the trial. But if for some unforeseen reason, our product got better over time, then the agency could claim that the product tested subsequently, was not representative of the product injected into the patient.

Now there may be other issues that we're not as familiar with which the agency may raise. But to the best of our knowledge, these are the issues that really come to the table.

I appreciate you being frank. It's very helpful. One last question is, what kind of work are you doing, or what could you do to prove that the product does not get better over time?

OK; now that is a difficult one. Difficult one, other than perhaps citing a number of reasons why that shouldn't be so, scientifically speaking. But we have not done the potency testing on a real-time basis and one year, or two years later because this testing has only been available to us in the last few months.

So some years later we can validate those experiments, and we're in the process of doing that. But we will not have that information for some time to come.

Thank you very much.

Thank you. At this time there are no further questions.

Thank you, (indiscernible). A replay will be available approximately two hours after this call through midnight, Eastern Time on May 4th 2004. Please dial 800-642-1687 from the U.S., or use the international number, which is 706-645-9291. The access code is 618-4241. The replay will also be available on our Web site, two hours from now. Thank you all again for participating.

Thank you, this concludes today's conference call. You may now disconnect.