Agenus Inc (AGEN) 2007 Q1 法說會逐字稿

Good morning. My name is [Sandrelle], and I will be your conference operator today. At this time, I would like to welcome everyone to the Antigenics' 2007 First Quarter Earnings 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. [OPERATOR INSTRUCTIONS]

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

Thank you, [Sandrelle] and good morning everyone. Welcome to Antigenics' conference call to discuss the financial results for the quarter ended March 31, 2007. With me today are Dr. Garo Armen, Chairman and CEO, Shalini Sharp, Vice President and CFO. We are also joined by Dr. Andrew Parsa, Assistant Professor in the Department of Neurological Surgery at the University of California, San Francisco and the lead investigator for the Phase I-II study of Oncophage in recurrent glioma.

We hope that all of you have had a chance to review the press release that was issued this morning. During this call, we will review the financial results, as well as provide a corporate update. We will then take any questions you might have.

But before we continue, I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the Company's ongoing commitment to reduce cash burn, anticipated sufficiency of funds, developments in the cancer vaccine industry, the current and future clinical development, and regulatory and commercialization activities, results and timelines for Oncophage and the potential market for and the growth and development of products containing QS-21 by the Company's collaborative partners and licensees.

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, the risk of the inability of the Company to operate within its targeted burn rate and identify additional means of cost savings, unfavorable data resulting from the analysis of the Oncophage Phase III part 1 kidney cancer trial data, retention of key employees, clinical trial enrollment, decisions by collaborative partners and licensees, decisions by regulatory agencies, timing and results of clinical studies, timely and successful development of QS-21 manufacturing capabilities and the factors described under factors that may impact future results in management's discussion and analysis of financial condition and results of operation section of Antigenics' Form 10-K as filed with the SEC on March 16, 2007.

Antigenics cautions investors not to place considerable reliance on the forward-looking statements contained in this call. These statements speak only as of the date of this call 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.

Before we move on I would like to note that for the purposes of this call, the phrase net burn rate means cash used in operating activities plus cash from investing activities less debt repayments and dividend payment.

With that, I will now turn the call over to Shalini Sharp, who will review the financial results for the quarter.

Thank you, Robert and good morning to everybody. I will now review our financial results for the quarter ended March 31, 2007. For the first quarter of 2007 Antigenics incurred a net loss attributable to common stockholders of $8.9 million or $0.19 per share. This is compared with the net loss attributable to common stockholders of $15.4 million or $0.34 per share for the same period in 2006. The decreased loss reflects the company's efforts to maintain a low rate of net cash burn and an increase in revenues associated with milestone and manufacturing payments from our QS-21 licensees among other factors.

Turning to our income statement, revenues are comprised primarily of the sale and supply of QS-21, our vaccine adjuvant product for clinical development purposes. Revenues amounted to $2.4 million for the three months ended March 31, 2007, as compared to $60,000 for the same period in 2006.

During the quarter we received $2 million for the completion of the transfer of manufacturing technologies and know-how related to QS-21 to GlaxoSmithKline. Total research and development costs for the quarter ended March 31, 2007 were $6 million, compared with $8.5 million for the same period in 2006. This reduction largely represents decreased clinical trial expenditures related to our Phase III clinical trials and other decreases in both the clinical and preclinical areas related to our commitment to reduce cash burn.

Total general and administrative expenses for the first quarter were $4.3 million, compared with $5.9 million for the same period in 2006. This reduction was primarily due to our ongoing commitment to reducing cash burn. During this quarter we completed the sale of our interest in Applied Genomic Technology Capital Fund, a limited partnership. This resulted in $1.665 million in cash proceeds offset by a capital call of $165,000. We had $32.3 million in cash, cash equivalents and short-term investments at the end of the quarter. We believe our cash balances are sufficient to fund our operations into 2008.

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

Thank you, Shalini and thanks everyone for joining us today. I will give you an update on the status and the prospects of our key programs, and allow ample time for Dr. Andrew Parsa to give his presentation on the glioma results, which were formally presented at the recent AAAS meeting from -- in front of a standing room only audience.

I will leave the details to Dr. Parsa but I should point out that because of the compelling results from the Phase I portion of this trial we will expeditiously move forward with the development of Oncophage in glioma. As glioma represents an important unmet medical need, it may also allow us for an expeditious lower cost quicker means of registering Oncophage.

You will see from Dr. Parsa's presentation that Oncophage generated an immune response in every patient treated in this trial. Particularly given the sophisticated testing he has used to measure tumor-specific immune responses, we are very encouraged that this type of immune response measurement represents an important surrogate marker for the activity of Oncophage.

The extremely positive data we have seen in glioma both in the form of immune response and indications of clinical activity is also encouraging in light of the development in the field of vaccines in general and cancer vaccines in particular, as well as, the specific attributes of Oncophage. For example, in the past several months we have seen clearer signals that cancer vaccines are going to make their way for use in patients based on several factors.

One, clinical data from several products suggesting patient benefit accompanied by no major safety and quality of life issues. So there is more and more data suggesting that cancer vaccines will have an important place in the treatment of cancer. Two, the potential for regulatory flexibility based on the demonstration of clinical benefit that takes into consideration the overall risk benefit, as well as, other specific attributes of cancer vaccine, such as the fact that their most appropriate use is in earlier stages of cancers. Thus the reliability of resource from such analysis may have to be weighed in and clearly such an interpretation of data will require changes from conventional methodology. And three, the potential use of credible surrogate markers, such as immune response along with other clinical data to demonstrate efficacy.

As I indicated in my previous presentation in February, there is now a wider acknowledgment of the need for use of cancer vaccines and the need for dramatic changes that may be required for the approval of these products. These topics were discussed at the FDA-NCI workshop in a number of talks including in remarks made by the NCI director as recently as in February.

Based on more recent events the positive push from reform appears to be in initial stages. At the end of March, the FDA advisory panel reviewing Dendreon's Prostate Cancer Vaccine, Provenge voted 13 to 4 recommending approval despite [post-tuck] nature of the analysis in a small group of patients. While the FDA has yet to make its final decision on Provenge, the positive [panel board] is another indication that traditional regulatory guidelines are difficult to apply to cancer vaccines.

The group of experts on the panel clearly understood this difficulty and decided that offering a nontoxic patient specific therapy to cancer patients is more important than adhering to regulatory rigidities which have been the hallmark of Black Box product development and purchase of the past. With these promising developments in mind, I will layout our plans for the potential approval of Oncophage in renal cell carcinoma in some key geographies, including possibly the US.

As we had previously indicated at the end of March we closed out our Phase III renal cell carcinoma study. In our press release this morning we announced that the updated analyses will be released in -- by Christopher Wood -- Dr. Christopher Wood in his presentation at the upcoming American Urological Association Meeting on May 31st.

The upcoming analysis will include all data gathered up to our initial November 2005 cutoff in which we showed a 40% plus reduction in recurrences in the 361 patient intermediate risk population. We will also show obviously with the updated analysis all the data gathered between November 2005 and March 2007.

As you know, one controversial point with our trial has been the so called sub-group analysis which indicated benefit in clearly defined group of better prognosis for earlier stage patients. I will spend a few minutes on this to make sure that you understand our rationale, our approach and our methodology.

We conducted the largest trial in renal cell carcinoma patients who were rendered disease free after surgery, a total of 604 eligible patients. These groups of patients have a moderate to high risk that their cancer will return. In our trial we enrolled both intermediate risk and high-risk patients. These definitions have been used by ECOG, the Eastern Cooperative Oncology Group and they represent two categories of patients with clearly different outcomes for recurrence. The intermediate risk group has about a 40% chance of cancer coming back and the high-risk group has about a 60% chance that their cancer will return.

The analysis based on data that was gathered up until 2005 indicated a 40% plus reduction in recurrence of cancer in the intermediate risk group. The intermediate risk group represented the majority of the eligible patients in our trial, which was approximately 60% of the total patients enrolled.

Given that this magnitude of reduction in recurrences equates to a very significant benefit many of the experts we consulted with at the time suggested that we should follow these patients for a longer period of time, perhaps, another 12 to 18 months, and if these trends continued and that if the recurrence-free survival was also corroborated by survival benefits that the signal seen in these patients would be more reliable.

This combined with the fact that essentially all experts agree that patients with better prognostic factors are the ones who are most likely to benefit from cancer vaccines, gave us the resolve to continue to follow these patients. In the next several weeks we will announce the results from the analysis of data collected from an additional 16 months of follow-up.

The updated analysis will represent a more mature data set than our previously released analysis, something that is especially key when it comes to the study of cancer vaccines in patients with better prognostic factors because in these patients time to a measurable event such as recurrence-free survival or death takes a very long time, typically many years.

If the updated analysis proves to be positive we will request a pre-BLA meeting with the FDA to discuss the possibility of filing for approval in the US. Irrespective of the potential for US regulatory filing however, we will continue to review the possibility of full or conditional approval in a number of other geographies notably Russia, Canada, Europe and Japan.

Let me now switch to our other vaccine program QS-21. While we continue with the development of registration of Oncophage in various geographies, our licensees are doing the same with about 20 vaccines containing our powerful vaccine adjuvant QS-21. One of our licensees, Elan, recently indicated in an article in the Wall Street Journal that their Alzheimer's disease programs are moving forward with their QS-21 containing vaccine HEC-001 expected to move into Phase II trials in the next few months.

This vaccine represents a very significant market opportunity for Elan and Wyeth as well as, for Antigenics. There are currently about 10 million Alzheimer's patients in the US and Europe and no currently approved therapy that significantly modifies the course of this disease.

Our biggest licensee GlaxoSmithKline is advancing several vaccines containing QS-21 in their proprietary adjuvant systems. These programs spend both prophylactic infectious diseases vaccines such as for malaria, as well as therapeutic cancer vaccines such as for lung cancer. Earlier in the year GlaxoSmithKline presented [II/III] clinical data comparing some of their proprietary adjuvant systems most of which contain QS-21. One of these was singled out by GlaxoSmithKline as the key to simulating an effective immune response. GSK expects five different products containing QS-21 to reach the market by 2012.

As you know, we will earn our royalties on commercial sales of vaccines containing QS-21. We currently earn manufacturing fees for clinical development, as well as, for milestones. So far this year $2 billion in milestones have been received with almost no expenses incurred by Antigenics related to QS-21, therefore this product line is already profitable for us.

With just the two assets I covered today, Oncophage and QS-21, which represent half of our current programs, I hope I have given you some impression of the scope of development at our company and the reasons for our enthusiasm. With a potential Oncophage approval in one or more geographies in the near-term and the approval of QS-21 containing vaccines starting as early as 2009, Antigenics is in a position to derive significant value for its important portfolio of products and platforms starting in the next couple of years.

This concludes my prepared remarks. I will now turn it over to Dr. Andrew Parsa, who will provide an update from our glioma trial. Dr. Parsa?

Thank you, Garo. My name is Andy Parsa, I am neurosurgeon at University of California, San Francisco and I am happy to speak today regarding our interim results for our Phase I-II glioma trial. I will be covering five points in my short presentation. I will discuss my independence as an investigator, I will discuss a little bit about the background and the appeal for the heat shock protein technology and as it applies to cancer vaccines.

I will discuss my clinical trial design, I will discuss the results to date that were presented at the American Association of Neurological Surgeons Annual Meeting last month and also discuss our plans for future trials and our recruitment. With regard to independence, I am an independent investigator who has no financial interest whatsoever with Antigenics. The funding for the clinical trial that I will be speaking about was procured through peer-reviewed methods, and specifically with regard to the National Cancer Institute and the special programs of research excellence program that facilitates program project grants for cancers.

With regard to the background the appeal for heat shock proteins is significant when one considers the advantage of a polyvalent vaccine that is a vaccine that can target multiple antigens. The science behind the heat shock protein technology is very appealing with regard to the ability of the heat shock protein to interact with specific receptors on antigen presenting cells. The specific immune response that one can achieve with very little material from the patient is also appealing and as we have seen with many studies including the one I am about to discuss is very well tolerated. With regard to the clinical trial design, the recurrent glioma trial design with a Phase I, II clinical trial. That means that the first portion of the trial was designed to assess safety and feasibility and the second part of the trial was designed to assess efficacy. Now, while it was designed currently with regard to the Phase I to assess efficacy we have been able to follow some parameters to get an idea of whether or not we see a clinical response correlating with our biological response. The patient population we are targeting is a very difficult one, an unmet medical need, one were patients have failed conventional therapy and have recurrent high-grade glioma, which offers extremely poor prognosis.

With regard to our results, our first goal is to assess the safety and feasibility of this modality in recurrent glioma patients and as we've seen with other applications of this excellent technology there is no significant side affects and every patient tolerated the application of the heat shock protein vaccine quite well. Twelve patients constitute our Phase I portion and we are currently gearing up to initiate our Phase II portion. In those Phase I patients we have been able to follow several parameters for an immune response. We used several techniques including evaluation of the phenotype of T-cells circulating in the blood. That means that we look at how the T-cells change and whether or not they appear to be activated. We can also look at the numbers of specific types of cells in the blood indicative of an immune response and in this regard the natural killer cell population appears to be extremely important.

And finally, we can look to see whether or not there is a specific anti-tumor immune response in patients and this is done by both restimulating cells before-and-after vaccination with the actual vaccine used for the patient as well as cells taken from the patient that represent the actual tumor of the patient.

In all cases, each and every patient who we've evaluated, which includes all 12 patients to date, there has been a notable immune response which appears to be tumor specific. This is unprecedented with regard to glioma vaccines because it demonstrates a polyvalent approach that has evoked in immune response that has been seen across a number of different patients with a number of different clinical phenotypes. With regard to our efficacy results, our anecdotal results -- again this not powered to evaluate efficacy. Our anecdotal results suggest that in the 8 of the 12 patients who we can evaluate to date for a 6-month overall survival, 7 out of the 8 have gone well beyond the 6-and-a-half months, which is a standard benchmark for recurrent glioma patients with regard to survival.

Finally, in terms of future trials and recruitment, as Garo mentioned and alluded to the ideal patient population is perhaps not a patient who has failed many different types of therapies and had residual tumor as is the case with many of the recurrent glioma patients in our present study. Ideally, we would like to get this modality of treatment into an upfront situation with patients who have primary glioma resected and can have their Oncophage vaccine concurrently with standard radiation and chemotherapy. There is precedent for this in the cancer vaccine world and there is precedent in this for the glioma vaccines.

With regard to recruitment we have had an overwhelming response with patient efficacy groups as well as others who want to enroll in our trials and I am looking forward to opening up the Phase II shortly. This concludes my presentation, thank you.

Thank you, Andy, I think we are ready for questions now. One correction that I should mention, apparently when I spoke I said the AUA meeting is on the 31st; it's actually on the 21st of May. The discussion on the updated results of Oncophage will take place on the 21st of May, this month. Thank you.

[Sandrelle] could you please review the Q&A process.

At this time [OPERATOR INSTRUCTIONS] and your first question comes from the line of Ren Benjamin.

Hi, good morning and thanks for taking the question. I guess my question has to deal with the Phase I/II trial and it is clearly very interesting that all of the patients had an immune response, but you went further to -- you know -- to kind of compare this to a historical benchmark as to how well they did as far as survival is concerned and so I wanted to explore a little bit more as to how equivalent were all the patients -- you know -- were they -- did they have the same sort of prognostic factors, or were they [markably] different and how that compares to the historical numbers?

Andy?

Yes, I am happy to answer that question and it's an excellent question. The patients in this clinical trial in order to enroll have to meet a basic set of criteria that include among other things, a basic fundamental Karnofsky performance status, which is a metric we use to assess clinical stability of the patient. They also have to have had a prior diagnosis of high-grade glioma with prior conventional treatment, in other words they will have had to have failed all conventional treatments which are currently available. The comparison group is a historical control group, which has been used by the North American Brain Tumor Consortium among other groups and it's a mix of patients who satisfy the basic criteria that I described briefly just before and who are measured with regard to overall survival after recurrence of their glioma. How these patients compare to those is very favorable. It is the same patient population and it is the same pathology. If anything our patients are probably a little worse off than your typical patient who enrolls in one of these trial because many of these patients unfortunately cannot have a gross total resection of their brain tumor in part because their brain tumor extended into what we call eloquent cortex, or parts of the brain that are really important for basic fundamental functions including speech language and motor function. Accordingly, many of these patients had residual tumor at the time of initiation of experimental treatment and the age of our patients was in general a little bit older than your typical patient with a glioma who is enrolled on trials and reported, so we have not skewed the data with regard to optimizing our patient population, if anything, these particular patients are -- one would predict would have a tougher time, which makes us more encouraged by our anecdotal clinical efficacy results.

Can you remind me Dr. Parsa as to how -- by how much these patients have exceeded the historical benchmark?

It ranges from patient to patient. The historical benchmark is typically looked at is 6-and-a-half months after treatment of recurrent glioma and these patients have extended anywhere from one to two months beyond that to -- we have two patients now who are going on a year after recurrence, so it is a wide range of responses and again 7 other patients have gone beyond the 6-and-half month benchmark, but again I have to emphasize that these are anecdotal results to date, it is a small grouping of patients, but I think certainly worth mentioning when one considers the robust immune response we are seeing in each and every patient and I should also add that many of these patients are multiply recurrent gliomas, so in other words patients who have failed one or more other experimental therapies prior to enrolling on this protocol, which also suggests that the stringency of this clinical result is a little bit higher than you would see in a standardly optimized Phase II study.

And where did you get the, I guess -- the product for the -- how was the product made in these cases? Was it biopsy and was it fairly uniform as far as the end-product that you got for each patient or were they all able to get sort of equivalent doses, or how did that work out?

That's a very good question. The standard procedure we have developed is a basic replicative, was successfully done for the renal cell carcinoma and the other studies that Antigenics have completed in essence this standard of treatment for recurrent glioma that surgically accessible is attempt to gross total resection. The patients undergo a gross total resection and en bloc resection if you will, what that means is that we try to keep the integrity of the tissue maximum and get that off to Antigenics to make the vaccine. In the OR we confirm the diagnosis of a high-grade glioma prior to shipping it. We have to have at least 7 grams of tissue resected in order to make a sufficient quantity of vaccine that can be used for the regulatory test needed to release it for the patient as well as provide at least 4 vaccines for the patient. So the minimum number of vaccines that the patients have received on this protocol are 4 vaccines by definition, they have to have at least 4 vaccinations. The maximum number that a patient has received thus far is over 20 vaccinations for a patient who has gone on for a very long time.

So that was going to be my next question is -- in the two patients that have lasted over a year did they correspond with the ones who got the most vaccines?

They did but when you -- when you step back and look at that correlation -- I don't think we can say that it's causal yet. There is -- obviously the longer you live the more opportunity you have to receive the vaccine and therefore it's not clear that the vaccine is necessarily facilitating longer life. However, I will say that based on the immune response data that we have seen it would appear that more vaccination is better and that -- if you can get 4 vaccinations you've really initiated an immune response, which is detectable over a wider ray of rigorous assays, so I say that the minimum number of vaccination should be 4 and that's the way the protocol was designed in part based on the prior experiences of Antigenics.

That's it. Thank you very much for your answers.

The next question comes from the line of [Calio Barage].

Two questions for Garo. Garo could elaborate on your thoughts on when would you plan to move to Phase II in glioma and also -- you know -- you made a comment of potentially path of registration of Oncophage outside the US. Could you give us a little bit more on that?

Sure. Let me answer the second question. I will ask Andy to answer the first one, since he is going to be integrally involved in the progress with the glioma trial. There will be other centers, obviously included but Andy will be the key investigator (inaudible) initiation and the conduct of the trial. In terms of our activities with regards to registration of Oncophage in geographies outside of the US. As you know regulation is slightly different in different geography. For example in Canada there is a precedent for a cancer vaccine approval [Novacin] a number of years ago, which was not approved in the US, but approved in Canada and the product did not commercially make it in Canada only because the Company that was the originator of Novacin did not have the resources to launch a product only in Canada. So, Canada is a specific geography, which we are interested in. In addition to that regulation in Europe states that one can get approval and this is a regulation that has been in the last couple of years, conditional approval in Europe, which is not really open from a regulatory perspective in the U.S. just yet and what that means is that if the data is strongly suggestive of a benefit to patients and you agree with the European Regulatory Agency on how to fulfill additional condition that you will get approval to market your product and those conditions will have to be fulfilled within a certain period of time, which is subject to negotiation with the regulatory agencies in Europe. So this is an opening that has been around for a brief period of time now for the last three years and we will certainly explore this.

In addition to that, certain geographies like Russia are becoming important, whereas for example up until two years ago you could not sell anything other than a generic product in Russia because of the lack of funding or lack of the investment in that country. Because of the dramatic changes in their economic condition, in the last two years a number of proprietary medicines notably cancer products like Gleevec, Avastin, Herceptin and so on have become prominent products within Russia being reimbursed by the government at rates that are certainly equal to the rates of reimbursement in the U.S., so that geography certainly represents an interesting opportunity and given the fact that we enrolled a significant number of patients in Russia, Poland and Europe meaning for example 25% of our patients came from Russia, that these geographies coupled with the enthusiasm by investigators who participated in our trial may form the impetus for us to be able to get regulatory approval and have a potentially successful launch. So these are the kinds of things that we are working on at the moment and we will update you on the progress we make as there are more tangible benchmarks that we meet. And Andy, if you don't mind answering the question about the timelines for moving into Phase II with the glioma trial?

Thank you Garo I am happy to do so. Our intent is to open up the Phase II in July here at University of California, San Francisco and we have had so much interest from across the country from patient efficacy groups as well as other investigators that we are going to be opening up the Phase II portion at two additional sites which we will be announcing over the next month once we have attained the appropriate approvals from those institutions.

And Dr. Parsa, how would you design the trial, the same as the Phase I?

Well, it's -- in terms of eligibility?

Yes.

So what we are doing is making only a slight modification for the current trial design. In particular, we are limiting the number of recurrences that a patient can have to one recurrence so in another words it's ideally a first recurrence and this is in part because we don't believe that, in a patient who has had multiple recurrences and has a disseminated disease, that perhaps a cancer vaccine is going to be the best approach and that's I think been borne out by the excellent analysis of the renal cell data suggesting that minimal tumor burden is associated with a more efficacious response to vaccine and also we are going to be considering powering the study appropriately to evaluate efficacy at a -- with a much more significant statistical power than obviously the Phase I was designed for.

So, upon diagnosis those patients don't have metastatize disease and it is a full reflection when the -- and the vaccine is administered concurrently with chemo or after chemo?

Well. If -- this particular patient population by definition has failed conventional radiation and chemotherapy so they present to us with radiographic or clinical progression of their disease. They are surgical candidates based on the location of the tumor and accordingly they undergo surgical resection. Postoperatively, they get a postoperative MRI scan of the brain to document the extent of resection and that material that we resect is what we derive the vaccine from. That's what we sent to Antigenics to make the vaccine. Once the patient recovers within the span of three to four weeks afterwards, after surgery they initiate their vaccine and only their vaccine; they have no concurrent chemotherapy at that time.

Okay. Thank you very much.

[OPERATOR INSTRUCTIONS]. And there are no further questions at this time.

Yes. Thank you. So to close the call, a replay will be available approximately two hours from now through midnight Eastern Time on May 22, 2007. Please dial 1-800-642-1687 from the U.S. or use the international number, which is 706-645-9291. The access code is 5354696. 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 1800-962-AGEN. Thank you.