Agenus Inc (AGEN) 2004 Q3 法說會逐字稿

Good morning. My name is Tamara and I will be your conference facilitator today. At this time I would like to welcome everyone to the Antigenics third quarter 2004 financial results conference call.

[Operator instructions].

Thank you. Mr. Howarth, you may begin your conference.

Thank you Tamara and good morning, everyone. Welcome to Antigenics conference call to discuss our corporate and clinical progress, as well as our financial results for the third quarter of 2004.

With me today are Dr. Garo Armen, Chairman and CEO of Antigenics; and Peter Thornton, our Chief Financial Officer, as well as other members of our senior management team.

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 and then open the call up for questions.

But 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 fillings 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 Risk Factors in the amendment No. 1 to Form F-3 as filed with the Securities and Exchange Commission on September 29, 2004, for 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'd now like to turn the call over to Peter Thornton, our Chief Financial Officer, who will review the results for the third quarter. Peter.

Thank you, Jack and good morning. I would now like to review our financial results for the periods just ended. For the quarter ended September 30, 2004, we incurred a net loss attributable to common stockholders of $18.7 million or $0.41 per share. This is compared with the net loss attributable to common stockholders of $17.8 million or $0.45 per share for the same period in 2003.

For the current quarter and the results reflect the acquisition of certain intellectual property and related scientific assets from Mojave Therapeutics resulting in a charge for acquired in-process research and development of $2.9 million. The cost of acquisition for these assets was primarily satisfied by the issuance of 350,000 shares of our common stock.

For the nine months ended September 30, 2004, the company incurred a net loss of $39.3 million or $0.89 per share. This is compared with net loss for the same period of 2003 of $47.9 million or $1.23 per share. Should note that the reduced net loss for the nine-month ended September 30, 2004 compared to the same period in 2003, reflects the recognized gains of approximately $14 million from the sale of our manufacturing rights for feline leukemia virus vaccine. This business accounts for a discontinued operation in both the current and prior periods resulting in the re-capitation of certain prior period amounts.

Turning to revenues for three months ended September 30, 2004 revenues were $282,000 compared to zero for the three months ended September 30, 2003 after taking account of the re-classification of discontinued operations noted previously.

The revenues for current quarter are comprised primarily of research and development revenues, including shipment to clients of QS-21. For the nine months ended September 30, 2004, revenues were $579,000 compared with 928,000 for the same period in 2003.

Turning to research and development expenses. For the quarter ended September 30, 2004, these amounted to $9.8 million compared with $13.2 million for the same period in 2003. The decrease in these expenses in the current period primarily reflects the reduction and clinical trial expenses as we reached the completion of enrollment in our Phase III trials.

Total research and development expenses for the nine months ended September 30, 2004 were approximately $31.6 million compared with $35.1 million for the same period in 2003.

And finally, cash, cash equivalents and short-term investments amounted to $106.3 million on 30th of September, 2004. This concludes the financial portion of the call and I will turn it over to Garo.

Thank you, Peter. Good morning. I would like to take a few minutes now to bring you up to-date on some of our clinical activities. We have concluded, as you know, enrollment in our C21 Phase III metastatic melanoma trial. This is a trial similar in construct to the renal cell carcinoma trial and it is also an event-driven trial. When the last event occurs, we will analyze or scrub the data and we expect to announce the results sometime in the second quarter of 2005.

As you know, we had some difficulties with the manufacturing process in the Phase III melanoma trial and I'm happy to report that a change in the inhibitor process has significantly improved the production of vaccine for melanoma tissue. As reported at the end of the second quarter, our overall manufacturing success rate was 69% and the subsequent change has increased the success rate to 83%.

I'd like to spend a few minutes also to bring you up to date on the progress toward initiating part two of the Phase III trial in renal cell carcinoma. The documentation has been prepared and submitted to the agency and we're awaiting comments.

Once we have satisfied the agency we will commence enrollment sometime this quarter. This trial will essentially be the same as the part two -- or part one of the renal cell carcinoma trial with some very minor amendments. We expect to use roughly 80% of sites from the first trial, which will help us in the enrollment process and finally, when we start enrolling patients in this trial, our products will have met FDA testing requirements for product characterization prospectively.

As far as the part 1 renal cell carcinoma, we had completed enrollment, as you know, for patients in the summer. The trial is designed to measure both recurrence of disease, as well as survival as the end point.

And the final analysis is triggered by a certain number of recurrences and current trend indicate we will hit the required number of events sometime late in the first quarter or early in the second quarter of next year at which time we will analyze the data and subsequently disclose the results.

I'll now end our formal remarks and take questions that you may have.

Tamara could you review the question and answer process, please.

[Operator instructions].

Your first question comes from Derrick Tang with Needham & Company.

Hi, it's Mark Monane. Good morning. Could you comment on the -- could you comment on the specified number of events and talk about how close you are to reaching those specified number of events for the renal cell trial? And while you're on the renal cell trial, can you talk about the different scenarios again for us on regarding the potential BLA applications?

Sure. Let me comment on the specified number of events. The number of events for the renal cell carcinoma trial are slightly above 200. And we are over 80% of the way there as of now. And we anticipate that based on the current tracking rate we will get there as I said sometime late in the first quarter or early in the second quarter, barring no significant changes in these events, which we anticipate will not occur, meaning that the trend should presumably continue as it has been for the last year.

In terms of BLA filing, as we said before in our conference calls and our public disclosures, the agency has not yet been satisfied that the product was a well-characterized product in our part 1 of the renal cell carcinoma trial.

And based on that, the agency has indicated to us, as we had disclosed previously, that without a characterized -- well-characterized product one cannot submit a BLA for product approval. What we plan on doing is analyzing the results from this trial because it is clear to us that the trial design is such that when we analyze the results and obtain the results -- assuming we demonstrate benefit as specified with our statistical analysis, it is clear to us that the integrity of those results can be trusted, meaning the trial is a well designed trial to measure this particular endpoint.

And it is a well-conducted trial. And we have additional comfort because in part 2 in our discussions with the FDA, there has essentially been no substantive changes in the trial design.

Once we have the results we plan on submitting to the agency additional scientific information that will substantiate that our product is a well-characterized product and the retrospective testing of that characterization for potency purposes should be considered. If the agency accepts our arguments, then we will take our guidance from them and make plans to submit the BLA. Should the agency not accept our arguments, which we plan on submitting to them then we will wait for the conclusion of the Phase III trial part 2 of renal cell carcinoma and go through the same process then.

So on in this -- in part 2 that was helpful. Last question, in the part two Phase III trial for renal cell carcinoma, I think you mentioned earlier that the protocol will be very similar to that from the part 1. We saw 800 patients desired for to make 650 eligible. Is that consistent with the part 2?

OK. The part 2 will be approximately 600 patients.

OK. And is that 600 patients that will be eligible or 600 patients to enroll to get to a target eligibility?

Because of the eligibility criteria will have been tightened up a bit, those will be eligible patients for final data analysis.

Thanks. Got it. Thank you for the -- that information.

Your next question comes from Lei Zhong with Rodman and Renshaw.

Good morning. Thank you for taking my call. I guess the question is aside from the characterization issue that's apparently behind you, what do you think you have learned from the first of the part 1 of Phase III RCC trial? Are you just going to repeat that with basically well characterized product or are you going to take a different enrollment patient up, you know, population in terms of the sickness or the disease in terms of the, you know, different phases they are in? Can you explain to me a little bit more?

Right. So, when you say besides the product characterization issue, we have internally maintained that our product is all along a well-characterized product. The difference between part 1 and part 2 is that characterization in part 1, we weren't able to demonstrate the potency of product in part 1.

Prior to administration of the product, the patient up until the resumption of patients from the clinical hold, resumption of enrollment after the clinical hold brought there, at which time we tested potency prospectively and so, and the results have been very satisfactory since then.

So aside from the timing of testing of product, we have not had any product characterization issues. Now in the second trial all patients will be tested prospectively for potency measure of the product.

In terms of the patient population, patient population in part 2, Lei Zhong, on will be essentially identical to patients in part 1 with slightly tightened up criteria for enrollment which will give us a somewhat cleaner patient population for analysis purposes.

That's one of the reasons; by the way, we enrolled 800 patients in part 1 in order to have 650 eligible patients as defined by the trial characteristics. In part 2 that could be tighter, so we expect to enroll 600 patients and presumably have all patients eligible for now.

Right. That's very useful. In the first -

Staging of these patients are essentially identical.

Right. But in the first Phase III trial, if I remember correctly, there were about 62% patients or in phase or stage 3 non-metastatic RCC. What is your analysis or your assessment of historical recurrence-free survival rate for that particular patient population?

Right. So, there is really no good data on this. OK, because there has not been a well conducted trial, specifically in this patient population. We in our analysis or statistical analysis, in the trial have shown some very conservative numbers and in reality the numbers will be somewhat more favorable, meaning that these patients have a slightly worse outcome than the assumptions we made going into the trial.

And so, you know, the rule of thumb has been perhaps 50-60% of the patients that fall into the categories that we've defined in this trial will be cured by surgery alone.

Right.

And the remainder will recur and eventually die. And what we are trying to do is demonstrate the benefit of the product in those remainder of the patients. So in essence, if 40-50% will relapse and die eventually, we are attempting to show a significant reduction in that number of recurrence and death.

And should we borrow what you have publicly disclosed, the hazard ratio from the part 1 of the Phase III into the part 2 of the Phase III then?

Essentially, yes.

OK. Thank you very much.

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

Good morning. Thanks for taking the call. Can you talk to us a little bit about the strategic decisions to begin part 2 trails before seeing the data from the part 1?

Very simple Ren. We had the following. Should our attempts to convince the agency that part 1 should be sufficient to file a BLA be successful, having started part 2 during the timeframe we decided to start it, will really not be a negative per se. OK.

Should we not be successful in our attempts to convince the agency that part 1 alone should be sufficient for a BLA filing, then having started part 2 essentially nine months to a year earlier, or at least the process of part 2, nine months or a year earlier will have given us the advantage of that nine months to an earlier for the conclusion of that trial. Should the agency feel comfortable that perhaps we should file with part 1 alone, however, they would like to see part 2 come to a conclusion. This will have provided them with added confidence level to see that we are starting part 2.

OK. And just as a follow-up, can you give us your timeline or timeframe for the completion of part 2?

Our estimate for part 2 is that we will complete enrollment in this trial in approximately 14-18 months. And we will hit the prescribed number of events in approximately 12-18 months beyond that. And so you can add up the numbers and come up with your own timeline.

Got it. OK. Terrific. You announced today that the enrollment for the melanoma trial is complete. What is the total number of patients that havr been enrolled?

Approximately 312 patients.

Three hundred and twelve, OK. And you also mentioned that the manufacturing success rate has increased from 69% to 83%, I believe. At what time in the trial did this take place? Meaning, you know, did it happen when there was 50 patients left or 100 left to enroll?

Sure. Let me tell you what's happened with this trial. When we started the trial, our manufacturing success rate was little bit higher than the 69%. And subsequently it's declined below 69%. And this was due to variabilities in the tumors and perhaps in handling and so on and so forth. And we tested our new processes in the last 20 patients or 24 patients, and of those we have achieved the new success rate that I have reported to you.

OK. OK. Great. And just as a follow-up question to that. How many people of the 312 are on the treatment arm and based on the manufacturing success, has it affected the statistical power necessary to detect the difference you are looking for or the survival difference you are looking?

The trial is randomized two to one.

Right.

Meaning every two patients that takes the - take Oncophage, one takes the standard of care, which is a mixed bag of things. In our analysis of this trial, because of the high failure rate for manufacturing and because of the fact that we have randomized patients prior to the discovery of the failure of vaccine, any patient are intent to a -- treat analysis purposes, any patient who we cannot make vaccine for, who has been randomized in the vaccine arm, obviously, is considered a treatment patient. And that is a big strike against us, because it penalizes us.

Right.

So in the final analysis of this trial, we will break up all of these or break out all of these numbers and try to learn from this trial, which is a trial that I think will give us some very significant data points and that will help us in the design of the next trial.

While we believe internally that we have a strong case we can make, because of the trial design and other characteristics of the renal cell carcinoma trial to submit for approval. We do not think the melanoma trial -- the first melanoma trial by itself will be sufficient for any product approval purposes.

We do believe the data from this trial will be important for us to submit as part of our package. But by itself this trial will not be sufficient for approval purposes.

So, do you think that you could get product approval from your -- if you get positive results from your second melanoma trial?

Yes.

OK. And then finally, can you just highlight some upcoming events that could drive shareholder value in the near-term?

There is really nothing much going on in the context of it being significant until the moment of truth emerges with our renal cell carcinoma trial. So as much as I'd like to give you a lot of data points between now and then, I think the most significant event that we are waiting for is renal cell carcinoma data.

Any presentations coming up, Ash or any other conferences?

I don't believe, is there anything in Ash? No, there is nothing going on at Ash. Hopefully depending on the outcome of the renal and melanoma trials, we will present both sets of data at well-known conferences sometime by the middle of next year.

Perfect. Thank you very much for answering the questions and best of luck.

[Operator instructions].

Your next question comes from Robert Casnac with Asberry Securities (ph).

Good day. Any -- your expenditures of actual cash versus your present current assets, how does that stack up, please?

As you know, we reported approximately $106 million in cash at the closure of the quarter. And the burn rate in the last quarter was approximately $16 million.

Thank you.

Your next question comes from Charles Park with Kairos Investments.

Hi. I just had a question about the financing, given the situation, do you have any plans to raise additional funds before the results are known of the RCC data or will you be waiting after the data?

We have really no plans to issue stock at current levels if that is specifically your question. We had filed a shelf registration and every time we file a shelf registration and we have by the way, filed shelf registrations for the last four years, I believe, very consistently to bring our shelf back up to 100 million in order to be able to put ourselves in a state of readiness to pull the trigger on a potential offering of stock, should the environment be favorable. But outside of that, we have no current plans or discussions to issue equity at six dollars a share.

Thank you.

Your next question comes from Ron Opel with Morris and Abbott.

Will there be biochemical markers or components as part of the end points for either trial or will the end points be primarily to survival itself?

The end point in our Phase III trials are either recurrence of disease or survival, depending on the stage of disease and the circumstances. For example, the primary end point for our RCC trial is recurrence free survival. And secondary end point is survival. In our melanoma trial, the primary and the only end point is survival.

And the reason for that, the rational for that is there is no real noticeable difference between recurrences of the disease in melanoma given the stage of patients or/and survival, so it doesn't make sense to capture both.

In terms of any markers that you asked, there are no plans to measure any markers for the purposes of demonstrating product effect. We have plans to gather up some data in subsequent trials that we conduct in order to do exploration of to see which markers may be relevant for future monitoring purposes.

But as you may know, there are no accepted markers by the agency currently other than significant clinical measures or to determine the status of disease and survival and so there's no purpose in trying to capture those for product approval purposes.

Thank you.

Your next question comes from Robin Levin with Karo Logic Partners (ph).

Hi, guys. How are you? Two quick questions for Peter. This is Derrick Brand over at Karo Logic. The first is just on your interest expenses, whether you want to break them out from the other expenses in your income statement? And the second is just wanted a little clarification on the reclassification of the feline leukemia virus cell revenue.

Sure. I'll have had Peter Thornton, Chief Financial Officer, to answer that question.

Yes. On the interest income, I can give you a breakdown afterwards. It is probably too detailed for here. And on the feline leukemia virus vaccine disposal, it basically consists of cash received of approximately $14.5 million less than the net book value of the assets actually sold and related disposal costs.

In any case, just so that you know, interest expense and income are small numbers.

Right. I just wanted to have them correct in our documents. In terms of the feline leukemia, there was supposed to be some deft manufacturing batches that were supposed to be completed at the -- that was indicated at the time of the sale. Has those been completed?

Yes. That has all been completed at this stage.

And the final proceeds have been received.

OK.

Thank you.

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

Thank you Tamara. A replay of today's call will be available approximately two hours from now through midnight eastern time on November 2, 2004.

Please dial 800-642-1687 from the U.S. or use the international number, which is 706-645-9291. The access code is 143-0172. The replay will also be available on our website approximately two hours from now.

Thank you again for participating in today's conference call.