Agenus Inc (AGEN) 2004 Q2 法說會逐字稿

Good morning. My name is Shatina (ph) and I will now your conference facilitator today. At this time, I would like to welcome everyone to the Antigenics second quarter 2004 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. (OPERATOR INSTRUCTIONS) Mr. Howarth, you may begin your conference.

Thank you Shatina 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 2004. With me today are Dr. Garo Armen, Chairman and CEO of Antigenics; Russell Herndon, President of Commercial Operations; Peter Thornton, our Chief Financial Officer, and Dr. Pramod Srivastava, Scientific Founder and Antigenics director.

We hope that all of you 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. 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' quarterly report on Form 10-Q for the period ended March 31, 2004, for a more complete discussion of these and other risk 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 now turn the call over to Peter Thornton, our Chief Financial Officer, who will review the financial results for the last quarter. Then Dr. Armen will discuss our recent corporate highlights, followed by Russell Herndon, who will discuss commercialization strategies.

Finally, we will open the call for questions. I will now turn the call over to Peter.

Thank you Jack and Good morning to everyone. For the 3 months ended June 30, 2004, Antigenics incurred a net loss attributable to common stock holders of $3.3 million or 7 cents per share. This is compared with a net loss attributable to common stock holders of $16.6 million or 42 cents per share for the same period in 2003.

For the 6 months ended June 30, 2004, the Company incurred a net loss attributable to common stockholders of $20.6 million, or 47 cents per share, this is compared with a net loss attributable to common stock folders for the 6-month period ended 2003 of $30.1 million or 78 cents per share. Please note that the reduced net loss for the quarter and the 6 months ended June 30, 2004, compared to the prior periods in 2003, reflects the recognized gain of approximately $14 million from the sale of our manufacturing rights for feline leukemia virus vaccine.

In accordance with accounting principles generally accepted in the United States, this business has been accounted for as a discontinued operation in both the current and the prior periods, resulting in the reclassification of certain prior period amounts. Having taken account of the reclassification of discontinued operations noted previously, revenues for the 3 months ended June 30, 2004, were $187,000, compared with $33,000 for the 3 months ended June 30, 2003.

For the 6-month period ended June 30, 2004, revenues were $296,000, compared with $928,000 for the same period in 2003. These revenues are comprised solely of research and development revenues.

Total research and development expenses for the quarter ended June 30, 2004, were $10.9 million, compared with $11.8 million for the same period in 2003. Total research and development expenses were $21.8 million for the 6 months ended June 30, 2004, compared to $21.9 million for the same period in 2003.

Cash, cash equivalents and short-term investments amounted to $17.5 million on June 30, 2004.

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

Thank you, Peter. Today I will provide an update on the highlights of the quarter, and answer any questions that you may have regarding clinical issues on behalf of Dr. Renu Gupta, the Head of Antigenics Development Program who is in Europe as we speak having discussions with respect to our registration plan for filing in Europe. This is a part of our overall strategy for global registration and commercialization of Oncophage.

Let me now start with the highlights of the quarter. Firstly, once again this year, we had a growing presence at ASCO with our exposure to the professional oncology community as well as at the urology conference and Russ Herndon, President of our Commercial Operations will highlight some of our achievements in his remarks in just a bit.

In addition, we also had 2 papers presented at ASCO regarding our Oncophage clinical trial; one on melanoma, and the other one on renal cell carcinoma. Second, we had a Type A Meeting with the medical review team over the FDA to discuss the Oncophage product registration strategy for renal cell carcinoma. This was subsequent to our submission of all the responses to the clinical and medical questions that the agency had, and the outcome of this meeting was that the agency expressed overall agreement with our proposed registration plan. We expect to have an open ongoing dialogue with the FDA throughout our product registration project.

While not part of this meeting, product questions and issues have all been addressed by Antigenics, and we have had the agency positive responses on a portion of our submissions and expect to have the responses on the remaining materials that we have submitted in the very near future. Our expectation is that we will have no remaining product issues going forward.

Thirdly, a successful pre-IND meeting was held with the FDA in advance of our filing an IND application for it AG-707, our genital herpes drug candidate, as you know, this is and non-personalized off-the-shelf multivalent product targeting 49 different sequences of the herpes 2 virus, or simplex 2 virus which is a virus responsible for causing genital herpes. Our IND will be filed over the next several months.

Fourthly, we have made significant progress in the development of our next generation Oncophage program. Antigenics has developed a method to increase the yields using this new process. This technology, when implemented, will result in a substantial increase in yields of antilogous products which will allow us to process much smaller samples of tumor tissue to manufacture vaccine.

Fifth, you may remember that there have been questions in the past as to the status of our Aroplatin program. We have identified a new formulation of our Aroplatin which has a number of advantages over the previous one, including improved stability, improved efficacy, and handling characteristics. We expect to complete the preclinical studies with this new formulation by the end of the year and start our clinical program shortly thereafter.

Sixth, we have put into play some small modifications of our melanoma project which is expected to improve the yield issues very substantially that these were mentioned if you remember in our last call, and we have addressed this issue very quickly in a short period of time.

Lastly, we appointed Peter Thornton, who you already heard from as CFO and Senior Vice President, and I am delighted that Peter is running our financial business as well as a number of related operation, such as corporate development as well as strategic planning.

With that, I would like to introduce Russell Herndon, who is the head of our commercial operations to give you a brief description on a number of activities that we have been undertaking over the last couple of years and some of these are maturing now and we thought it would be timely for him to give you a little update on those activities. Russ?

Thank you, Garo. Good morning. I would like to take the next several minutes to outline for you a few of the commercialization activities that are underway here at Antigenics. The activities I would like to highlight today surround increasing our market exposure and the preparation of our sales and marketing infrastructure.

Currently programs are underway to increase awareness and interest in Antigenics and in our products. The primary audience at this time are clinicians treating patients with renal cell carcinoma and metastasis melanoma and third-party pairs. Key opinion leaders have been identified and with their help we have established expert panels for our most developed programs. These panels meet regularly and are helping us evaluate label expansion strategies and future clinical activities.

Members of these panels have also been identified to participate in our (indiscernible) for renal cell carcinoma and melanoma providing medical education and product awareness. Additionally, we continue to present a professional medical society such as the Americas Society of Clinical Oncology, and the American Neurological Association as well as regionally based urology society meetings and key conferences focused on cancer therapeutics.

Our plans regarding our field support infrastructure can be divided into three segments; a marketing team, a direct sales team and a reimbursement team. Over the past year, we have been strengthening our marketing infrastructure with the hiring a medical science liaisons to assist in awareness programs while we continue our search for a Director of Marketing, Product Managers and Medical Education Specialist. Our sales team will be comprised of a Vice President of Sales with 3 District Sales Managers. We would also anticipate the need for approximately 30 Reps at time of product launch and are projecting around 70 Reps by the end of year one.

Supporting the salesforce will be a customer service group comprised of internal and outsourced product support personnel, partnered with a reimbursement team managing national accounts and CMS activities. A preliminary assessment our reimbursement strategy is complete and we will be refining this based on the outcomes of the activities surrounding the implementation of the new Medicare Reform Act of 2003.

As we move closer to commercial launch, we will continue to expand these activities to assure access of product cetaceans in a timely and appropriate manner. With that, I would like to hand the call back to Jack.

Thank you, Russ. Would you now review the process for asking questions and then we can take our first question?

(OPERATOR INSTRUCTIONS) Eric Tang (ph) with Needham & Co.

Congratulations on the progress so far. A couple questions. First, Garo, I was wondering if you could comment on when you have the Type A Meeting with the FDA, what was exactly the issues addressed regarding the project characterization issues? Can we assume that the assays that you have down retrospective are both susceptible to the FDA?

Okay. Let me firstly define what a Type A Meeting is. The Type A Meeting is a meeting with the clinical group at the FDA, and not the product group. Although product people may be present at this meeting, the expressed purpose of the meeting is to address clinical issues. The FDA previously had flagged to us a number of questions that they had for clarification, and a number of suggestions that they had for fine-tuning some of our procedures and processes and the conduct and analysis of our clinical trial for renal cell carcinoma.

At this meeting, we discussed all of these issues, provided clarifications and this was the submission of a very significant document to the agency, so a lot of these details were made available to the agency and the purpose of the meeting was to discuss any outstanding questions and issues in person. I think it is fair to say that we, as a Company were satisfied with this meeting in terms of having accomplished what we wanted to. I think if I am not being very presumptuous, the agency also termed this meeting as very satisfactory from their perspective. So, there are no real clinical issues outstanding going forward regarding our present and future trial strategies.

In terms of product characterization issues, as you know, when we were lifted off the hold last November, the FDA at that point had accepted our submission of what would constitute the potency testing of our products. Subsequent to that, we had to submit additional experiments to validate those potency assays and what I referred to in my conversation was specifically that -- that the FDA has responded positively for a portion of those submissions for the validation out our potency assay and other issues. My policy was the highlighted item in there. We are waiting for the validation to be approved on the other portion that we submitted. So, at the conclusion of this process, we expect to have no real major issues at all or even perhaps minor issues related to our product characterization.

When do you expect to hear back the FDA regarding the second portion of the validation part that you will turn into the FDA? Can you give me any guidance at all?

I think once again, the FDA is quite busy with a very heavy schedule, so I don't want to be presumptuous on their part, but we are hoping this will happen in the very near future.

Sure. Fair enough and I just have a quick follow-up question. I know you've mentioned in the past that you probably will start a second Phase 3 renal cell carcinoma and as well as melanoma. Could you comment on what will those trials look like, and when do you expect to start specifically the second Phase 3 renal cell carcinoma trial?

Let me comment that our second trial for renal cell carcinoma is expected to start very shortly. In structure it will be very similar to the first trial. It will be very, very minor modifications, if any. There will be some minor modifications from the first trial but it will be largely the same. As you know, the gold standard for approval of oncology drugs is to have 2 randomized, well-controlled fully powered trials at one extreme. At the other extreme, based on data as you know, approvals have been granted with a single Arm Phase II trial and our strategy is to proceed with the gold standard as this is the most responsible thing to do for us. We expect to confer with the pathogen opinion leaders as well as agencies around the world when the data from our first trial becomes available. Based on the outcome of that, we will decide what the best strategy is to proceed with which will be in the best interest of patients who suffer from kidney cancer and (indiscernible) setting in. As you know, these patients have no current treatment available to them. So that would be the overall strategy on the part of Antigenics.

So should we assume to see the effecting trial in the second half of this year or should we assume that we are going to see this trial after we've seen the data from the first trial?

No, I think you'll see the second trial commence in the next month or 2.

Sure. So it's going to be this quarter. Great. On the melanoma second trial, I noticed that you mentioned on the conference call that you did a small tweak to the product to increase the yield, so when are you going to move forward with the second trial? Is that going to be the new formulation of the product or it's still going to be the old product?

No. In fact, we have incorporated this minor modification in melanoma --

In the current trial?

In the current trial. Yes. We have notified the agency and we have already incorporated that small modification. It's not a major modification. It is a small modification, and this is by the way -- this does not relate to Next Generation Oncophage that I spoke about. That is a major change and that major change will not be yet incorporated into our Phase III trial. That will have to go through a process and at the conclusion of that process, we will start perhaps new Phase III trials incorporating the Next Generation Oncophage.

In the context of melanoma, the changes that we're talking about are small changes and those have already been incorporated into the melanoma trial. They will be incorporated into the new renal cell carcinoma as well as the new melanoma trial.

Great. One final question. Sorry to be a little too antsy (ph). When should we expect to see the final results of the first Phase III renal cell carcinoma trial?

As we have said, these results are going to be determined based on the number of events that we pick. The reason we have provided a range in the past is because it is very difficult to pinpoint the exact date that we are going to hit the number of events, if you will. So, we have said that it will be in the early part of next year, and I think we will stick to that for now.

Great. Thanks very much. I appreciate it.

Lei Zhong with Rodman & Renshaw.

Thank you for taking my call. I would like to go back with the potency issue one more time. When you mentioned the materials that were submitted, were those potency results from individual articles of the patients in the trials that was examined by the FDA?

What is the question?

Can you hear me?

Yes.

When you mentioned the materials, a portion of the materials that were discussed with the FDA, can we understand those materials?

I see what you mean. The materials that I referred to were not aliquots of vials that we collected for subsequent testing, rather those materials referred to validation of our potency assays. As you know, we have 2 potency tests that we have developed from scratch, and each one has a validation process that we have put into place and submitted those documentations to the FDA.

The agency has responded to 1 portion of the documentation, and in an affirmative fashion and not yet reviewed or completed the review of the second portion so when I said we expect those reviews to be completed in the near future, and at the conclusion of the this process that we expect not to have any other product issues going forward. That is what I was referring to.

Great. Do you anticipate then that you have to do, should be process be validated fully that you still have to access those experiments on the individual in a retrospective way or not?

Yes we will.

That will be after the conclusion.

At the conclusion or the acceptance of all the validations, I said, yes.

Could you give us a little update on the melanoma trial, please?

What update would you like?

How many patients -- what is the enrollment status and have you have any discussions with the FDA regarding potential registration plans?

We have not had specific discussions with the agency on the melanoma trial yet. We continue with the enrollment process. The enrollment is continuing at a reasonable rate. I believe we're pretty close to 300 patients right now. The total trial enrollment was approximately 250. So, that is where we are.

Okay. You mentioned on your press release the Next Generation Oncophage program. Are we expecting to see those kinds of results published sometime in the future?

I don't think so because the new process that we referred to is a highly proprietary process, and I don't believe the European application patent applications have been published yet so we would not divulge any details of that process just yet. But, you'll see progress throughout next year in terms of having taken steps to implement this process through the preclinical and into the clinic, if you will. We will have to start things from scratch with regard to this new process because it is a major change, in Oncophage manufacturing. So it will have no relevance to our current targeted markets, if you will, with the Phase III trials that we're pursuing right now. But I think it will have a very significant relevance in terms of expanding our reach to other cancers where tissue quantity may be an issue. As you know, tissue quantity is not an issue with the current trials that we're proceeding with.

Right. Final question on the d line. It seems to be flattening out. If we assume that you're going to start another RCC trial and the melanoma trial will pick up steam, how would you guide us in terms of expense and the burn rate this year -- in the second half of this year, rather?

Right. The expectation, Lei Zhong, is that next year burn rate will be a small uptick from the current year's run rate but not a very substantial one.

Thank you very much.

Bonnie Feldman (ph) with CCL Partners (ph) .

Congratulations. Most of my questions have been answered but just to clarify, are you still planning to submit your BLA filing in the renal cell carcinoma in the second half of '05? Is that correct?

Okay. That question was really answered, Bonnie, with my response to the status of our second renal cell carcinoma trial. Our strategy is to pursue an overall registration strategy which is the gold standard and based on the data that we get, depending on the geography, will be guided in terms of the exact timing of any filings.

Thank you.

Gabe Hoffman (ph), with Exhibitor Capital Management (ph) .

Hi. Good morning and thank you for taking the question. Thanks for the update on the progress with FDA. Garo, was there any way that you could be a bit more specific when you say that you have gotten positive feedback from FDA on a portion of our submission? Meaning what portion of the submission have you gotten positive feedback on? What portions of the submission are you still waiting to hear on? If there is any expectation of when there are there any kind of user fee dates or any things like that that are mandatory?

Let me clarify one thing. When I spoke about the portion of our submission having gotten a positive response to, I meant the product of related issues. Not the medical and clinical related issues. The medical and clinical related issues were addressed in our Type A Meeting, and there are no major outstanding issues at all left in that regard. We expect that we will continue to work with the agency in a very positive manner going forward. Small tweaks here and there, classifications perhaps, but no major outstanding issues.

In terms of the product portions of things, we have 2 potency assays and Phase II potency assays are used for each patient's products. They were submitted to the agency, the validation of these potency assays were submitted to the agency and we have gotten their feedback on one of them and waiting for the feedback on the other potency assay. So, in essence, based on our knowledge, we don't anticipate any issues. But we have not formalized or the agency hasn't formalized their feedback to us and we expect that to happen over the next several weeks.

Great. That's a very helpful. Just as a quick follow-up, when you have described in your 10-Q that the FDA and this is obviously when your 10-Q was filed before the Type A Meeting, when it said that the FDA has informed us that Oncophage has been insufficiently characterized and that the results obtained with an inadequately characterized product cannot be used to provide efficacy data in support of the BLA, is what you are saying today -- does that mean that the FDA now believes that Oncophage is sufficiently characterized and that the results from the first Phase III renal cell trial could provide efficacy data to support a BLA?

The answer is yes to both in the following way and let me clarify that. At the conclusion of our hearing from the product group on the second batch of our filings on the validation issue, at the conclusion of that process, it is reasonable to expect that Oncophage will have been fully characterized. With that, will we be able to use our renal cell carcinoma trial? The first renal cell carcinoma trial, the Phase III trial? As part of our BLA filing, the answer is yes, we expect to be able to use that trial as part of our BLA filing.

Great. That would be regarding at this time -- you could say that the FDA believes that the Oncophage that was used for all of the patients in that renal cell trial would be supportive of providing efficacy data?

That is correct.

Great. Thank you very much for the clarification.

Elena Gutenplan (ph) with Paramount Capital (ph) .

Thanks. Could you just explain to us what the difference is between a Type A Meeting and a Type B Meeting with the FDA?

Well, being not a regulatory person, perhaps I should refer to Russell Herndon here exactly for that definition.

The definitions that are provided have to do with the user fee act and so there are 3 classifications of meetings; there are Type C meetings, which are just routine update type meetings which have a 90-day clock for the agency to schedule or respond to. Type B meetings, which are meetings that could impact the conduct of the study and those have a 60-day clock to prepare and to sort of schedule the meeting. And then Type A meetings are meetings where there are -- the timeline to get this meeting scheduled is 30 days and that is because the issues are seen by both the sponsor and the agency to be important for the ongoing conduct of the studies to support an application.

Okay. Also, could you just provides more detail on the minor modifications in the protocol for the second renal cell trial and how it differs from the first?

I think it would be inappropriate for me to provide those details to you. Because a lot of these things are not a matter of public consumption, but rest assured that when we say minor, we would not want to characterize anything that is major as minor because that would not bode well for us neither would it both well for our relationship with the agency.

Have you discussed that trial with the FDA?

That is exactly what we did in the course of our Type A Meeting for renal cell carcinoma.

Okay. Thank you very much.

At this time, I would like to remind (OPERATOR INSTRUCTIONS) At this time, there are no further questions. Will there be any closing remarks?

Yes, Shatina, thank you. A replay will be available presently 2 hours after this call through midnight Eastern Time on August 4, 2004. Please dial 800-642-1687 from the U.S., or use the international number which is 706-645-9291. The access code is 868-0871. The replay will also be available on our website 2 hours from now. If you have any further questions, please call the number listed on today's release. Once again, thank you for participating.

Thank you. This now concludes today's Antigenics second quarter 2004 financial results conference call. You may now disconnect.