Agenus Inc (AGEN) 2006 Q1 法說會逐字稿

Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the Antigenics reports first quarter 2006 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 session. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press star then the number 2 on your telephone keypad. Thank you. I would now like to turn the conference over to Ms. Shalini Sharp. Please go ahead, ma'am.

Thank you, Jody, and good morning, everyone. Welcome to the Antigenics conference call to discuss our financial results for the quarter ended March 31, 2006. With me today are Dr. Garo Armen, Chairman and CEO, and Peter Thornton, SVO 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 provide a corporate update. We will 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 the company's ongoing analysis of the Oncophage Phase III, part 1 trial data, the brand release of such data, and the future development of Oncophage; the company's plans for restructuring and reduction of its burn rate; its future preclinical and Phase I clinical programs involving Aroplatin, AG-707, higher-activity Oncophage, and AU-801 and its collaborative partnering activities. These risks and uncertainties include, among others, the risk of unfavorable data resulting from the analysis of the Oncophage Part 1 trial data; retention of key employees; clinical trial enrollment; decisions by collaborative partners; decisions by regulatory agencies; planning and results of preclinical studies; and the 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-K as filed with the Securities and Exchange Commission on March 15, 2006.

Antigenics cautions investors not to place considerable reliance on the forward-looking statements made during this 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. 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,

Thank you, Shalini, and good morning. I will now review our financial results for the quarter ended March 31, 2006. For the first quarter of 2006, Antigenics incurred a net loss attributable to common stockholders of $16.3 million, or $0.36 per share. This is compared with the net loss attributable to common stockholders of $18.2 million, or $0.40 per share for the same period in 2005. The reduced loss is primarily attributable to reduced operating expenses and clinical activities on Oncophage Phase III trials were completed during Q1 2006, and the initial positive impact of prior-period cost-reduction actions.

With effect from January 1, 2006, we implemented a statement of Financial Accounting Standards Number 123 are related to the expensing of stock-based compensation. This resulted in a noncash charge for the quarter of approximately $900,000 charged to our operating expenses.

Turning to our income statement, revenues are comprised primarily of the sale and supply of QS-21, our vaccine adjutant product for clinical development purposes. Revenues amounted to approximately $60,000 for the three months ended March 31, 2006, as compared to $120,000 for the same period in 2005. We anticipate revenues increasing above Q1 levels as the year progresses as our partners continue development of products containing QS-21.

Total research and development costs for the quarter ended March 31, 2006, were $9.7 million compared with $11.3 million for the same period in 2005. This reduction largely represents the initial impact of cost reduction measures taken in December 2005 resulting in lower payroll costs and the prioritization of programs.

First quarter of 2006 also includes a noncash charge of $300,000 related to the expensing of stock-based compensation.

Total general and administrative expenses for the first quarter were $6.3 million compared with $6.8 million for the same period in 2005. The reduction was primarily due to reduced payroll costs and other cost-containment actions as a result of the measures taken in December 2005. In addition, the first quarter of 2006 also includes a noncash charge of $600,000 related to expensing stock-based compensation.

Turning to our balance sheet, cash, cash equivalents, and short-term investments amounted to 44.5 million at March 31, 2006, as compared to 61.7 million at December 31, 2004.

Over the last six months, we have taken significant steps to reduce our operating expenses. We will continue to do so as the year proceeds so as to prudently manage our business. After the quarter ended and rapidly after releasing the Phase III results for Oncophage in kidney cancer, we implemented a restructuring of our business. This restructuring eliminates 42 positions while further focusing activities on earlier-stage programs. As a result of these actions, we anticipate reducing our annualized net burn rate with effect from the start of the next quarter to approximately $35 million based on our current plans and expectations. Given our current cash position and anticipated burn rate, we believe that we will have sufficient cash to fund our operations to at least mid-2007.

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

Thank you, Peter, and thank you all for joining us this morning. Today I'd like to provide you a brief corporate update. As you may recall, in March Antigenics announced the results of its Part 1, Phase III clinical trial testing Oncophage in renal cell carcinoma. This trial did not meet its end points. One of the reasons, which may have contributed to this outcome, was the result -- the fact that an independent review of patient scans in this trial revealed the number of clean recurrences and that were substantially fewer than those reported to us by clinicians enrolling patients in the trial.

As we indicated on our previous call, a detailed analysis of this trial has been ongoing and is nearly complete. We plan to discuss the details with the FDA and expert clinicians in our efforts to determine the best path forward for Oncophage. And, appropriately, at the conclusion of these events we will make a public announcement disclosing the detailed analysis of our Phase III renal cell carcinoma trial.

In addition, updated data from our Phase III trial testing Oncophage in metastatic melanoma will be made public in a similar timeframe. Preliminary data from this trial showed that better prognosis patients, meaning the M1A group who were treated with Oncophage, had a trend towards better survival, and that this trend improved with more injections of our drug administered.

Currently we have a trial, which is a continuum to enrolled patients at the University of California in San Francisco testing Oncophage in recurrent glioma patients. Early data should become available in coming months, and it is expected that the investigator doing this trial will expend a number of patients in this study.

Separately, Phase I studies of Aroplatin and AG-707, our herpes product, are actively enrolling patients with initial data anticipated early next year, we also continue to make progress in our preclinical development programs with compounds such as AU-801 for the treatment of autoimmune diseases and higher-activity Oncophage, each of which could enter the clinic in the first half of 2007.

As Peter indicated, we have restructured Antigenics in order to lower our burn rate and minimize additional dilution. We will maintain a disciplined approach to conducting our business and continue to work on our programs to maximize value. We regarded top-line results from Oncophage as a temporary setback. We have the breadth and depth of products and the management skill to overcome this and rebuild shareholder value.

We look forward to sharing with you the conclusion of our analysis of our Phase III renal cell carcinoma trial as well as the progress of our internally and externally developed programs in coming months.

This concludes my formal remarks, and I think I believe we are ready to take questions.

[OPERATOR INSTRUCTIONS] Mark Monane, Needham & Company.

First, a financial question, please -- I am having some challenges understanding 35 million from the third quarter of 2005 onward. Can you just break it down for me how I should think about this in 2006 total, and then going through 2007?

I think, in general terms, as we projected forward based on current plans and anticipations, we certainly see our cash taking us into mid-2007 -- into the second half basically.

In terms of Q1, quite obviously, the burn rate is higher than we'd anticipate for the remainder of the year, largely driven by the fact that we were finalizing and had work ongoing on three Phase III trials, in effect. In addition, I think you've seen in December we reduced our headcount quite significantly and, again, in April, which, obviously, isn't reflected in the Q1 results yet but in April we also reduced our headcount and have taken other actions to prioritize our programs. So I think you'll see the burn rate coming down as a result of those actions for the remainder of 2006 and into 2007.

Right, and then just in terms of the numbers, 35 million -- so the first quarter is over, and the second quarter is underway now. In reference to the third and fourth quarter, is that 17 million for the third and fourth quarter -- 17.5 million?

What it is, the 35 million is an annualized number, so for the 12-month period from the start of the third quarter, it will be at 35 million annualized burn rate.

Thank you for going over that, sorry to be so concrete. But now to be less concrete, Garo, may I ask you to expand a little bit on the Oncophage platform? So the platform is technology that can move across a number of different products and a number of different cancers. How should we think about the platform versus the products versus the indications? I know it's impossible to get success in all of them, but does one trial not working -- is it a harbinger for future trials or should we think of these as [unintelligible]. How do you think about this?

I perhaps should qualify some of what you said. I think we have to make a distinction between a trial not having produced a positive outcome based on the overall patient population versus an indication from the same trial that our product may or may not be active in those patients' study or in some of the patients' study. So I think we should not make premature determinations on whether or not Oncophage is active in renal cell carcinoma, for example, from the results that we have disclosed so far on top-line outcomes of our renal carcinoma trial. Please don't read one way or another into what I said. That's the reason why we decided to do an in-depth analysis, which I made in my comments that we would discuss with the Food and Drug Administration and the experts in the field to get their read on what all of this means, and we will disclose it to the public appropriately at the conclusion of this process.

So I would not want to make any premature determinations as to Oncophage activity in renal cell carcinoma.

I'm sorry if I over-interpreted. Let me ask --

Let me just finish -- that's number one. Number two, you made a, I think, astute remark that we have a platform. It can be complicated in terms of zeroing in on where the best outcomes will be. So the way we look at Oncophage is we will -- within a very short period of time, know if Oncophage, in its current form, will be a product to be pursued in any indication. That's number one.

Number two, as you are aware, we have already started our efforts to test Oncophage in combination with other agents, and the rationale behind that was, as many of you may remember, a number of biological agents including some of the recent ones that have been approved, have not worked as single agents. They have worked in combination. And so it was prudent for us to explore to see if we could provide additional boost to Oncophage by combining it with logical agents; in other words, agents that would certainly not hamper the neurological activity of Oncophage -- so that's the second path forward.

The third path forward is, as I indicated, one of the programs we have is a Oncophage made with a different process, which, for reasons that we are starting to understand better, yields a product that seems to be twice as active in preclinical models as Oncophage is when tested side-by-side. I think that's an important consideration, and we have come to a point for confidence in the reproduceability of these results whereby we have a program now to take this product to the clinic, and we believe we will be able to enter the clinic with Oncophage made through this process sometime in the first half of next year.

So those are the three distinct paths to pursue the Oncophage platform, going forward. Does that address your question?

Absolutely. Thanks for the added information. Thank you.

[OPERATOR INSTRUCTIONS] There are no questions at this time. Are there any closing remarks?

Thank you very much. I will turn it to Shalini and thank you for the team for being exceedingly clear and to have not prompted more than one question. So, Shalini, why don't you do the closing remarks?

Thank you, Garo. To close the call, a replay will be available approximately two hours from now through midnight Eastern time on May 17, 2006. Please dial 800-642-1687 from the U.S. or use the international number, which is 706-645.9291. The access code is 8085047. The replay will also be available on our company website in approximately two hours. If you have additional questions after today's call, please call us at 800-962-AGEN, or 2436.

Thank you, this concludes today's Antigenics report first quarter 2006 financial results conference call. You may now disconnect.