Agenus Inc (AGEN) 2005 Q4 法說會逐字稿

Good morning. My name is Tanya and I will be your conference operator. At this time, I would like to welcome everyone to the Antigenics Fourth Quarter and Year-end Financial Results and Recent Highlights Conference Call. [Operator Instructions]

Thank you. Ms. Sharp, you may begin the conference.

Thank you, Tanya, and good morning, everyone. Welcome to Antigenics’ conference call to discuss our financial results for the fourth quarter and year ended December 31, 2005. With me today are Dr. Garo Armen, Chairman and CEO, and Peter Thornton, Senior Vice President and CFO.

We hope all of you have had a chance to review the press release that was issued this morning. We will review the financial results as well as operational highlights from the 2005 and then take any questions you might have for Garo or Peter.

But before I turn the call over to senior management, I would like to remind you that during this conference call, Antigenics’ representatives may make forward-looking statements, including statements regarding further demonstration of clinical activity of Oncophage; the revenue generating potential of the product pipeline; the timing of analysis and announcement of data from the Phase III trials in renal cell carcinoma and melanoma; plans to publish and present data from the Phase III trial in melanoma; plans to commence new clinical trials; plans to generate information related to the safety, efficacy, pharmacokinetics, dosing and immune response generation of product candidates; plans to advance preclinical programs and the commercial potential and market entry of products containing QS-21, as well as associated royalty income for Antigenics and projected cash burn.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, among others, timing of events in the renal cell carcinoma trials, the results of clinical trials, the cost of additional clinical trials, the ability to raise additional capital and factors described under “Factors That May Impact Future Results” and the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” section of Antigenics’ Form 10-Q as filed with the SEC on November 4, 2005.

Antigenics cautions investors not to place considerable reliance on the forward-looking statements contained in today’s press release or conference call. These statements speak only as of today’s date and Antigenics undertakes no obligation to update or revise the statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. Antigenics’ business is subject to substantial risks and uncertainties, including those identified above. When evaluating Antigenics’ business and securities, investors should give careful consideration to these risks and uncertainties

I will now turn the call over to Peter Thornton, who will review the financial results for the past quarter and year.

Thank you, Shalini, and good morning to everybody. I will now review our financial results for the quarter and year just ended.

For the quarter ended December 31, 2005, Antigenics incurred a net loss attributable to common stockholders of $17.9 million, or $0.39 per share. This is compared with a slightly lower net loss attributable to common stockholders of $17.7 million or $0.39 per share for the same period in 2004.

The fourth quarter of 2005 includes costs of approximately $1.0 million incurred on severance costs related to the focusing of our business activities announced in December 2005.

For the full year ended December 31, 2005, the Company incurred a net loss of $74.9 million or $1.64 per share. This compared with a net loss for the comparable period in 2004 of $57 million or $1.27 per share.

It is worth noting that the lower net loss in 2004, compared to that in 2005, reflects the recognized gain of approximately $14 million from the sale of our manufacturing rights for feline leukemia virus vaccine, which occurred in March 2004. In accordance with the GAAP, this business was accounted for as a discontinued operation during 2004.

The 2004 financial also included a charge of $2.9 million related to acquired in process R&D as a result of acquisition of certain intellectual property and assets from Mojave Therapeutics.

Turning to the detail of our income statement for the quarter and YTD, our revenues are comprised preliminary of research revenues related to supply of QS-21, our vaccine adjuvant, license fees and grant revenue.

Revenues amounted to $348,000 for the three months ended December 31, 2005, compared to $128,000 for the same period in 2004. 2005 revenues included a development milestone payment from one of our QS-21 licensees. For the full year ended December 31, 2005, revenues amounted to $630,000, compared to $707,000 in 2004.

Turning to the expense side of the income statement, total R&D expenses for the quarter ended December 31, 2005 were $10.7 million, compared with $10.1 million for the same period in 2004. For the full year R&D expenses amounted to $47.1 million in 2005, compared to $41.7 million in 2004.

The increased level of R&D expense in 2005 compared to 2004 primarily reflects the progress achieved on our ongoing Phase III clinical trials, including data analysis activities on our renal cell carcinoma and melanoma Phase III trials, trial startup costs on our Part 2 Phase III trial in renal cell carcinoma. And costs associated with initiating Phase I trials for our Aroplatin and AG-707, including related toxicology studies.

Total G&A expenses for the first quarter ended December 31, 2005 were $6.4 million, compared with $7.4 million for the same period in 2004. The reduction in these expenses reflects the strong focus on cost controls and the initial benefit of cost reduction measures implemented in December 2005. For the full year, G&A expenses amounted to $25.9 million in 2005, compared to $25.8 million in 2004. As a Company, we continue to remain focused on managing our costs prudently.

As a result of the actions taken by the Company during 2005, we have reduced our cash burn rate as we progress into 2006. These actions included reducing our headcount from approximately 251 to 170, as announced in December 2005, identifying cost savings in all areas of our business and focusing resources on our highest priority programs.

Headcount reductions during 2005 resulted in severance and related charges during the year of $1.6 million. The benefits of these actions are beginning to be achieved and we anticipate that, once we have completed the analysis of our Phase III trials over the next number of months, our annual cash burn rate will be in the region of $40 to $45 million on an annualized basis.

Cash, cash equivalents, and short-term investments amounted to approximately $61.8 million on December 31, 2005. Given our current cash position and anticipated burn rate, we believe that we have adequate cash to fund our operations into 2007.

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

Thank you, Peter and thank you all for joining us this morning. Today I would like to briefly update you on the Company’s operational highlights.

As you may recall, in December, as Peter spoke about, Antigenics streamlined its organization in order to reduce costs. As a result, the Company has sufficient cash to fund its operations into 2007. And I’m just simply repeating what Peter said.

At the same time, we have made strategic investments in experienced key hires such as Jill Forrest as VP of Marketing and Sales and Bruce Leicher as VP and General Counsel. These measures will allow us to pursue critical activities supporting the advancement of our high priority programs.

First of all, we anticipate completing the final analysis of our Phase III clinical trial with our flagship products Oncophage in renal cell carcinoma (or RCC) in March, with disclosure of the top line shortly thereafter in April. As you know, Oncophage is a patient-specific therapeutic cancer vaccine.

The final analysis of our Phase III trial in metastatic melanoma should be completed in a similar time frame, with the data expected to be subsequently published in a peer-reviewed journal and presented at an upcoming medical conference. We previously announced preliminary results from this trial showing a greater than 50% improvement in survival in a prospectively defined subgroup of better prognosis patients.

In addition, the first patient has been enrolled in an investigator-sponsored clinical trial with Oncophage in recurrent glioma. This is a new trial for us and as you know, glioma is brain cancer. This is happening at the University of San Francisco.

In conjunction with these monotherapy trials, we continue to pursue a strategy of testing Oncophage in combination with other agents. We already have a trial underway testing our other patient-specific therapeutic cancer vaccine, AG-858, in combination with Novartis’ Gleevec in patients with chronic myelogenous leukemia refractory to Gleevec.

Recently, we filed an investigational drug application (NDA) in order to study Oncophage in combination with I.V. all-trans-retinoic acid, or ATRA-IV in patients with metastatic RCC and melanoma. Other combinations of Oncophage with agents such as [sterafamib] and CTLA4 antibody are under development as well.

These combination trials are intended to boost the activity of Oncophage in order to allow us to more effectively treat patients with later stages of disease. We expect to quickly generate preliminary indications of safety and efficacy from these trials, because typically we would be looking for tumor responses as compared to survival benefit or time to recurrence, which takes a lot longer.

In addition, to progress with Oncophage, we continue to advocate our other vital pipeline programs. An improved formulation of Aroplatin, our novel liposomal platinum chemotherapeutic, is under study in a Phase I clinical trial. The product is designed to reduce current toxicities associated with other platinum chemotherapeutics as well as to overcome drug resistance.

Platinums, as you know, are a widely used class of therapeutics, oxaliplatin one of the later comers to the scene, for example, sold by Sanofi-Aventis, has estimated global sales of close to $2.0 billion last year.

Another of our pipeline products which recently entered the clinic is AG-707, our therapeutic vaccine for genital herpes. AG-707 consists of a recombinant human heat shock protein complex with 32 different synthetic peptides derived from the herpes simplex virus II, or HSV-2. It is estimated that at least 45 million individuals, or one in five Americans aged 12 and over, have genital HSV infections.

The WHO estimates that approximately 21 million people worldwide are infected each year. Currently available products, while they address the symptoms of genital herpes, do not substantially modify the disease. The NIH currently recommends three approved products, which have combined annual sales in excess of $2.5 billion.

Under development by our partners are a number of clinical products containing our QS-21 adjuvant. We expect that a number of products containing QS-21 with significant commercial potential could reach the market in the next several years, potentially resulting in significant royalty income for Antigenics.

In preclinical development is our AU-801, our autoimmune candidate, which has shown promising activity in animal models. Higher activity Oncophage made through an improved process is also in preclinical development. These programs continue to advance and we look forward to providing updates on their progress in coming months.

Antigenics has an exceptionally diverse product pipeline with blockbuster potential. Our ultimate goal is to achieve commercialization with our own U.S. oncology sales and marketing presence and through partnerships in other therapeutic areas and geography. As a result or our efforts in 2005, we now stand at the cusp of important clinical data from our Phase III trials with Oncophage in RCC, even as we have continued to drive the progress of other critical preclinical as well as a number of clinical programs.

This concludes my formal remarks and I believe we’re ready for questions now, Shalini.

Tanya, could you please review the process for asking questions?

[Operator Instructions] Robert Petrozzo with Joseph Stevens & Co.

Good morning. I had a question in reference to the short selling in the stock. There’s been a lot of publicity lately about short selling and in particular, naked shorting and regulation show. And as you know, I’m sure you know Antigenics has been on this regulation show list for quite some time. How could the Company protect itself from this inappropriate and obviously illegal short selling?

I hope that our efforts will not be concentrating on such reversal, if you will, of activities. But as you know, the practice of short selling is a perfectly legal activity. However, as you point out, the practice of naked short selling is perhaps not legal and I think the regulators as well as others are trying to determine how, if illegal, such activities can be regulated and curtailed properly. And as you point out, we have been on the list for quite some time.

In addition, while short selling is legal, probably activities associated with some short sellers is perhaps also illegal, meaning a deliberate campaign, for example, to discredit what a company says or does or announces shortly after the announcement in a campaign with various constituencies is not proper, at a minimum. And at worse it may be a very blatant illegal activity.

And though it has come to our attention, we are working with a number of regulatory agencies as well as broker dealers to point out who the potential culprits in such activities may be and to see what appropriate actions can be taken in order to end, if you will, illegal activities associated with short selling.

So, other than that, we would not to spend a lot of time and effort or any moneys whatsoever on such activities. Because while we’d like to protect the Company and its shareholders we also don’t want to distract ourselves from our daily duties of running our Company to build our business.

Thank you.

Dave Hoffman with Accipitor.

Good morning. Thank you taking my question. I was just curious if you could be a little more specific, please, on cash to fund operations into 2007. Are we thinking first half or second half or a specific quarter even? And second, if you’ve thought of a format of data for both the metastatic melanoma and renal cell data releases and if you’re planning to do them simultaneously or separately, albeit close to each other?

Okay. Let me answer the second question and I’ll defer the first one to Peter Thornton, our Chief Financial Office. In terms of the data determination, clearly once we’re in possession of material information, we are required to disclose that on an expedited basis.

So, timing, simultaneous releases of information between two trials is probably not something that we would opt to do. And as soon as we have information that we would consider material and we have sorted out all the details and consulted with the appropriate regulatory bodies and agencies, we’re under obligation to disclose that data immediately.

Obviously, as you know, such data disclosure has to be top line for public consumption purposes, because we do not want to lose our right to be able to present this data at an appropriate medical forum, as well as to publish it in an important journal.

With our two trials, melanoma is a 322-person, randomized trial in Stage 4 patients, studying prospectively defined three groups of melanoma patients. And it is an important trial and it deserves to be discussed appropriately in the right medical setting and we have already taken steps to do that. And you can expect us to present that data at a very important conference and also publish it in a very important journal.

I think the same thing is also true for RCC. This one happens to be a 720-some-odd-patient trial, randomized and a very important trial, the largest trial of it’s kind in this patient population. And I am confident that we will be able to discuss the results in a very important conference and also be able to publish it in a paper.

Now the melanoma manuscript is essentially being prepared for submittal and that will occur in the next month of so. Whereas the renal cell will be done quickly, shortly after the data is available to us.

Peter, would you like to address the first question?

Yes. In terms of our current cash position and how far that takes us out and clearly the range of assumptions that underlie our cash projections and obviously we have some critical highlights coming up in the near future.

I think, on a very conservative base and given the fact that we do actually control our own burn rate and we can certainly take our cash, at a minimum, into the first quarter. But I would reiterate also that we do actually control our burn rate and depending on a range of future outcomes, we have the ability to control that as we chose, basically.

Okay, great. That’s very helpful. Garo, I would certainly want to commend you regarding the data release. As you may be aware, there are other biotechnology companies that believe they can simply time the speed with which they analyze multiple studies such that they arrive at the finish line at the same time. And it sounds like you guys will be working equally hard on the analysis of both studies at the same time. Thanks very much.

Sure.

Ren Benjamin with Rodman & Renshaw.

Hi, good morning, Garo, and thanks for taking the question. A couple of questions, one is can you give us any thoughts regarding a follow-up melanoma trial? Is it something that you’re thinking about right now? What are your consultants saying and are you going to wait to design this trial and start this trial after the full data set is released?

And then, also, can you comment a little bit about the events to date regarding the renal cell trial? I remember in previous conference calls you could sort of gauge as to how the events are coming up and get an idea as to when the potential data would be released.

Okay. Let me answer the second one, because it’s relatively straightforward and easier. As you know, Ren, when we made the determination that we would analyze the renal data, we did it based on the fact that we have the raw number of events required to do the analysis.

And post that, we go through a CEC review, which is a review by independent radiologists and oncologists and they conduct their review blindly. And that review, while on track, has not been concluded yet and we are not privy to information that will give us the exact number of events which are not available to us yet, because the CEC review is not complete. At the conclusion of that review, we will be able to determine it.

However, irrespective of that, we will be analyzing the data and we have already had discussions with the regulatory agencies in terms of how do we go about doing it while not risking a study or any future studies. And I believe we have a competent mechanism in place to be able to do that. But I do not have the specific information that you ask for and won’t have that until the CEC review is completed, which should occur, by the way, in the next I’d say three to four weeks.

Now, as far as the first question is concerned, you talked about melanoma. As Peter indicated and I alluded to as well, we are interested in containing our burn rate to a level where we are less dependent on external factors, if you will, to carry our business to a certain point.

And as Peter indicated, one thing that we can do very deliberately is address our burn rate. And in the interest of doing that, we have opted not to pursue the second trial in melanoma just yet, until several things happen, one that we have the renal data, which may or may not confirm the melanoma data.

If it confirms the melanoma data then we would be absolutely certain that we have activity with Oncophage, at least internally, Antigenics and our advisors would be certain. That if we confirm the same trend, specifically, at a minimum, at a minimum, that better prognosis patients do better and very importantly that patients who receive more vaccine shots -- and I want to make a differentiation here. Not more vaccine but more shots of vaccine do better.

If those two things, at a minimum, are confirmed in our renal trial then we will have a very, very high level of confidence as to the activity of our product, so well many of the advisors that we have talked to in the field of melanoma as well as RCC. And at that point I think it would be appropriate either through a partnership or through our additional resources that we expect to put into place at that point, then it would be appropriate for us to pursue a second trial in melanoma.

We have clarity, based on what we already know, what that trial should look like and we will continue to fine tune that determination with the results of the renal trial. Does that address your question?

Yes it does. Thank you very much and good luck.

Thank you.

[Robert Santopeteros], Private Investor.

This is for Garo. I’m just wondering, are you in talks right now with anyone on partnering with Oncophage?

Yes. The answer is yes. We have various partnership discussions ongoing right now. As you may know, because the RCC data is coming up soon, I think our job has been to educate partners and make sure that they are ready to make a decision, pending the renal outcome and a number of potential partners are in that position. It would be silly for a partner to come to an agreement with us or to conclude an agreement a month or two before the RCC data is out, which is a very important trial for us.

In addition to that, we have started a number of efforts in other areas. For example, with Aroplatin, which now is a very exciting product, not just by our definition, also by the definition of a number of interested parties and we have a substantial number of scheduled discussion with some of the leading pharma and biotech companies regarding Aroplatin. Obviously companies who have a great deal of interest in the field of cancer and are looking at Aroplatin as a potential new generation platinum that may be able to address the shortcomings of existing platinums, which our preclinical data, by the way, does indicate.

Further, as we also alluded to in our presentation, a sleeper for us, which we haven’t spoken to very much because a number of programs that used our product, QS-21, were not really progressing four or five years ago to the point of discussion.

However, all of a sudden now, in the last six, nine months, we’ve seen a significant level of activity by a number of partners who use QS-21 in both therapeutic as well as prophylactic vaccine. And we’ve gotten indications from them as to what the demand for our product, QS-21, will be in connection with their commercialization plans.

And so we are getting ready to expand our activities in a very measured way to take advantage of that as you may know, we don’t have any expenses associated with QS-21, other than some modest manufacturing expenses.

Yet we have all the development costs born out by our partners. And in return we get manufacturing and royalty fees, which, in the event of some blockbuster products and some of these products may very well be blockbuster products, would translate to some significant royalty income for Antigenics starting in the next several year.

So those are the partnership activities in a nutshell.

So what you’re saying, Garo, is that big pharma is very interested in your pipeline of products, but they’re just waiting for just FDA approval. Am I right about that?

Not FDA approval. I think it would be appropriate to say, at this late-stage, with regard to Oncophage - not the other products but with regard to Oncophage- at this late-stage they’re waiting for data from our pivotal, or I should say randomized, Phase III trial to come out.

And that would be next month?

That would be in the next, I’d say by, some time by mid-April.

So you’re very confident or hopefully, that the FDA will approve Oncophage then?

No, I did not make that statement at all. While we will absolutely pursue all regulatory avenues, provided that we show unequivocal activity of our product in RCC, we will pursue all activities with regard to regulatory agencies. I have not expressed confidence because I don’t know just yet what the situation would be with regard to any definite approval.

In addition to that, as you know from our filings, we have indicated that the FDA has made points with regard to our specific RCC trial, because we have not had all the pieces in place at the start of this trial. While subsequently we have addressed those pieces, it still needs to be determined as to whether or not the agency would change its mind and come around those issues.

Well, do you feel that they will come around and that you gave everything that they wanted?

I think that if we show unequivocal activity of the product, the agency may work with us to that end.

Okay. That sounds pretty good. All right, thank you, Garo. Thank you very much.

Sure.

[Karen Sterling] with Atlantis Investment Company.

Good morning and thanks for taking my question. Could you please give us an update on the Phase II study in chronic myelogenous leukemia with AG-858 and Gleevec, how that’s proceeding, when you expect the data and what’s your future plan for the development of AG-858 are?

Okay. So this is, again, as you pointed out, a Phase II program with a different heat shock protein vaccine. It’s also an autologous vaccine, but it uses heat shock protein 70 as compared to heat shock protein 96 in Oncophage and we had started a trial, which we then expanded, and the reason we expanded the trial was two-fold. One, that we wanted to make sure a more appropriate patient population was studied, based on the inclusion criteria.

Number two, we also wanted to make sure that the collection mechanism for blood, from which we made AG-858, was properly and uniformly practiced throughout different centers, because this product requires leukopheresis of the patient in order for us to make AG-858. Remember in solid tumors we use the tissue from surgery, but in liquid tumors or leukemias, we need blood that’s leukopheresed from the patient as our raw material.

But in the initial stages of our trial, after the first 20 patients or so were enrolled, we discovered that the practice of collection wasn’t uniform. Each center was using slightly different practices and as a result, we were not sure, 100% certain, of the integrity of the product from the perspective of it being uniform.

And so we’ve added additional patients to this trial with a standardized collection mechanism and we expect or we hope that these patients will be completed enrolling by about mid-year or the third quarter of this year. And we should have, presumably, some results or a glimpse at results by the end of the year or the beginning of next year and based on that, we will make our future plans in terms of how do we take AG-858 forward.

I think we have time for just one more question.

[Edward Kena] with Access Securities.

Hello? Hello?

Yes, go ahead, please.

Yes. In your earlier remarks, you made reference to a potential to study Oncophage in combination with CTLA4 antibody. Could you be a little bit more specific on that? I mean, were you referring to the melanoma version or RCC and are there any patients who have actually been dosed with this or is this just on the drawing board?

It is on the drawing board. We’re in discussions with -- as you know, there are only a handful of providers of CTLA4 antibodies. It is likely that it will be in indications that you described because there is some experience in certainly melanoma with CTLA4 antibody.

Our rationale there is as follows. Oncophage in Stage 4 patients has shown activity in the past. But that activity has been modest, because, as you know, by the time you vaccinate a patient and by the time you kick up the immune response, it takes several months. And if a patient has less than six months to live, it’s very difficult to achieve any effect in that patient because the immune system is not really up and running at least several months after vaccination.

However, we have also thought that if we use a helper we may be able to effect that situation favorably, to stack up odds in our favor, if you will. CTLA4 antibody is a universal agent, not just for melanoma or RCC, but it’s a universal agent that lowers the tolerance threshold. And tolerance is the body’s own mechanism by which it protects itself against immune response. So, when there is an immune response, you have this tolerance wall and CTLA4 lowers that tolerance wall in order to enhance an ongoing immune response.

However, when you use it by itself, it is quite toxic. In a number of cases, toxicity can be quite nasty because the doses required to achieve therapeutic effect are quite high. Our rationale has been that if we use it with a very, very specific immune activator like heat shock proteins, then we may be able to get away with using a much lower dose of CTLA4 antibody to get a desired effect. And that’s the rationale behind our thought process and we’re working diligently with one of the major players in the field to start clinical trials.

Well, it sounds good. Yes, there was data last May on using a CTLA4 antibody as a monotherapy in RCC and it did show activity, but there were problems with toxicity.

That’s correct.

Okay. Thank you.

Okay. I think we conclude our session now, Shalini.

Thank you. To close the call, a replay will be available approximately two hours from now, through midnight ET on March 9, 2006. Please dial 800-642-1687 from the U.S. or use the international number, which is 706-645-9291. The access code is 5442896. The replay will also be available on our Company website in approximately two hours.

If you have any additional questions after today’s call, please call us at 800-962-AGEN, or 2436. Thank you.

Thank you. This concludes today’s conference call. You may now disconnect.

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