Agenus Inc (AGEN) 2007 Q2 法說會逐字稿

Good morning. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Q2 2007 Antigenics earnings conference call. (OPERATOR INSTRUCTIONS) Mr. Anstey, you may begin your conference.

Thank you, Chris, and good morning, everyone. Welcome to Antigenics' conference call to discuss the financial results for the quarter ended June 30, 2007. With me today are Dr. Garo Armen, Chairman and CEO, and Shalini Sharp, Vice President and CFO. We hope that all of you 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 contains forward-looking statements including but not limited to statements regarding the sufficiency of our cash balances to fund our operations, the ability of the Company to maintain a low cash burn rate, opportunities in the Russian oncology market, the potential clinical benefit of Oncopage in kidney cancer based on a subgroup analysis, activities and potential strategies for pursuing market registration for Oncopage including in Russia and related timelines, future development of products using QS-21 by Antigenics' licensees and the future payment of revenues including milestone payments and royalties in connection with the development and commercialization of QS-21.

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 ability to raise capital and finance future development of our product candidates, decisions by regulatory authorities including the Russian Ministry of Public Health and the U.S. FDA, and Antigenics' dependence on its collaborative partners, such as GSK, to successfully develop and commercialize products containing QS-21 and abide by the terms of their agreements with Antigenics; scientific risks associated with the development of vaccines, the competitive risks that other sources of competitive adjuvants could become available; and the factors described under "Factors that May Impact Future Results in the Management's Discussion Analysis of Financial Condition and Results of Operation" section of Antigenics Form 10-Q as filed with the SEC on May 10, 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 payments.

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

Thank you, Robert, and good morning, everybody. I will now review our financial results for the quarter ended June 30, 2007. For the second quarter 2007, Antigenics incurred a net loss attributable to common stockholders of $10.1 million, or $0.22 per share. This compared with a net loss attributable to common stockholders of $14.3 million, or $0.31 per share for the same period in 2006. The decrease 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 $1.4 million for the three months ended June 30, 2007, as compared to $96,000 for the same period in 2006.

During the quarter we earned a $1 million milestone payment from Elan Pharmaceuticals related to their Alzheimer disease vaccine candidate containing QS-21. Subsequent to the quarter we earned a $100,000 milestone payment related to Acambis PLCs influenza vaccine program.

Also subsequent to the quarter we executed a binding letter of intent with GlaxoSmithKline related to QS-21 manufacturing, from which we are entitled to see revenues beginning in the third quarter.

Total research and development costs for the quarter ended June 30, 2007 were 6.1 million, compared to 7.9 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 pre-clinical and clinical areas related to our commitment to reduce cash burn.

Total G&A expenses for the second quarter were $4.4 million compared with 5.4 million for the same period in 2006. The reduction was primarily due to our ongoing commitment to reducing cash burn. We had $25.4 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. Thank you, everyone, for joining us today. I will now briefly update you on the Company and the highlights, the significant highlights and advancements that have taken place since the last call.

I will begin with Oncopage, which has seen a historic event take place. This quarter we filed with the Russian Ministry of Public Health for the approval of Oncopage in nonmetastatic renal cell carcinoma at intermediate risk for recurrence of disease. This filing was based on updated Phase III data from our C100-12 trial that was presented at the annual meeting of the American Nephrology Association in May. I will refresh your memory on the data in a minute, but first I would like to give you some detail about the Russian market.

By 2008, the Russian oncology market is expected to near $1 billion in revenue, which will be an increase of over 142% from 2005. This growth is fueled primarily by novel branded drugs as opposed to generics, which previously dominated. Oncology drugs like Gleevec and Velcade are seeing growth rates from 100% to 300% per year in Russia. The main reason for this extreme growth is the steady increase of income in Russia, as well as the initiation of a government drug reimbursement program that covers more than 14 million Russians who otherwise could not afford these medicines.

Branded drugs are becoming the norm, incomes are rising, and the government is paying for these drugs. These key indicators coupled with the fact that more than 16,000 new cases of renal cell carcinoma are diagnosed in Russia each year means that the market potential for Oncopage there would be significant.

This Russian filing was based on the updated data release in May, which included an additional 17 months of follow-up from our initial data announcement. I'll remind you that the recurrence-free survival, or RFS, was the primary endpoint in this trial. An overall survival was the secondary endpoint.

With more mature data, the RFS improvement we are seeing in the 362 patients intermediate risk patient group shows a 45% reduction in risk of recurrence. The P value of this difference is 0.004, and a hazard ratio is 0.55.

Also of great importance, for the first time we are seeing an overall survival trend in favor of Oncopage. You may remember that as of the first date (inaudible) in November 2005, the death rate in each arm were more or less balanced. There were 12 in the observation arm, and 14 deaths in the Oncopage arm. In the 17 months between then and March 2007, an additional 13 deaths occurred in the observation arm with only one occurring in the Oncopage arm. This brings a total to 25 deaths for the control arm, or 14%, and 15 deaths for the Oncopage arm, or 8.2%. Because of the low numbers involved, these figures are not yet statistically significant. But we hope that further data maturity tracks into formal of patient registry will show a continuation of this trend.

So, it is because of this promising data that we have filed in Russia, and we will explore the possibility of doing so in other countries as well. We have discussed and continue to discuss this data with key opinion leaders of Europe and Canada, and are putting in place plans to do so with regulatory bodies in those geographies as well. We will report on these advancements as they take place.

As you all know, we are less optimistic when it comes to the U.S. market as this time. We will seek guidance from the FDA in our updated data, but do not expect that they will be highly amenable to a filing based on this trial alone. Because of this, we're expending few resources in domestic market. We will move forward with our plans in glioma, an area where we have seen very promising early data, but we will not move forward with renal cell carcinoma until the regulatory environment improves or we have commercial revenues that allow us to initiate a reasonable confirmatory trial.

Regardless, we feel that much value is to be found in the ex-U.S. markets including Russia. We should know within a year the extent of our prospects for Oncopage in kidney cancer in a variety of geographies, and we will adjust our strategy accordingly. In the meantime, our early stage product and, of course, the robust pipeline of vaccines containing QS-21 will continue to mature.

With that, I will move on to QS-21, which, as you know, is our vaccine adjuvant that is licensed to multiple corporate partners. QS-21 is included in more than 20 vaccines in development today. In the last few months important progress has been made in three of these all in areas that represent larger markets for our licensees as well as for Antigenics.

The first advancement which we announced previously was with GlaxoSmithKline MAGE-3 vaccine for non-small cell lung cancer. At ASCO in May, GSK announced initiation of the largest ever Phase III trial to be conducted in lung cancer. The lung cancer market is one of the largest in the cancer space with more than 1.3 million new cases diagnosed worldwide each year. This trial with over 2,000 patients is based on promising Phase II data that indicated a 25% reduction in recurrences in the adjuvant setting.

The second advancement which we first mentioned in this morning's release is with the very promising vaccine for Alzheimer disease being developed by Elan and their partner Wyeth. Elan has notified us that it is initiating a Phase II trial of the vaccine and Antigenics will receive a $1 million milestone payment for this. Elan's Alzheimer vaccine targets beta amyloid, the peptide implicated in this disease.

This well validated target is also the focus of Elan's antibody product that has recently entered Phase III. The hope is that the vaccine can exhibit superior side effect profiles, meaning it could be used for healthier earlier stage patients and expand the size of the market. That is not to say the market is small. As you know, Alzheimer's disease is one of the biggest unmet medial needs to date. Worldwide, more than 26 million people are currently inflicted with the disease, and that number could quadruple by 2050.

Another recent advancement related to QS-21 is the sophisticated influenza vaccine being developed by Acambis. We recently had an option to license our adjuvant. Acambis has initiated a Phase I trial of 80 patients. As you all know, influenza is an extremely important medical issue these days, and the ability to tackle it in less onerous fashion will be very valuable.

Acambis does this by using the M2e antigen in their vaccine. M2e is highly conserved in all strains of the influenza A virus. So, from season to season, Acambis vaccine will target the A strain of the virus without the need for type of reformulation that is done each year with traditional flu vaccines. More importantly, however, in the event of a sudden endemic flue, the M2e antigen could be applicable. All the viruses from a deadly outbreak in the Twentieth Century were based on the A strain of the virus, so stockpiling can be performed in advance of the reasonable -- with a reasonable confidence that the vaccine will be useful if and when it is necessary.

The last thing that I'd like to touch upon is the following. Regarding QS-21, as you know, last year we restructured our agreement with QS-21, which just recently took place in a different form. If you recall, in 2006, we renegotiated our license and supply agreements with QS-21. This secured royalties to Antigenics for 10 years after launch in exchange for granting GSK partial manufacturing rights of commercial grade QS-21 before 2014, and full rights after 2014.

Our recent restructuring has accelerated this transfer. In return, Antigenics is then (inaudible) upfront payment of $2 million plus a total of $5.25 million in equal increments over the next five years. We will still provide free commercial grade QS-21 to GSK, and most importantly still be entitled to the same royalties as before.

This is beneficial to Antigenics in two ways -- one, it is a thoroughly modest manufacturing income, the bulk of which would have come much later; two, it allows us to focus our efforts on other projects without a negative financial impact. Probably the most important readout should be that this is a further validation of GSK's commitment to QS-21, and the breath of their vaccine pipeline containing it.

The underlying theme on all of this is that QS-21 is a franchise advancing as expected with no setbacks. While things may not go as smoothly forever, we expect the momentum to continue to build as more and more vaccine moves through the pipeline towards commercialization. As you know, we have a very diversified number of products by multiple partners that contain QS-21, and that, we think, will reduce the risk associated with the development of a single product.

This concludes my prepared remarks. We should now move on to the Q&A session. Robert?

Thank you, Garo. At this time, we are ready to take questions. Chris, could you please review the Q&A process, please?

Yes, sir. (OPERATOR INSTRUCTIONS) Your first question comes from Ren Benjamin.

Hi. Good morning, Garo, and thanks for taking the question. Could you give us I guess a little bit of color around the Russian submission? So, maybe I missed this in the beginning, but did you have discussions with the Ministry of Public Health, and did they encourage you to submit the application? And then I guess the other thing is regarding timing. How does the review of the application occur and when might we hear something from the Russian Ministry of Public Health?

Certainly. Let me give you the background of all this. As you know, approximately 25% of the patients who participated in our renal cell carcinoma trial came from Russia. So, when we were getting ready to have investigator meetings, we did meet with all the investigators in Russia in November of 2006. At that point it became clear to us that they encouraged us to file in Russia -- these are the investigators who participated in the renal cell carcinoma trial from Russia -- they encouraged us to file in Russia based on their unanimous opinion that the product was beneficial in patients with intermediate risk of disease, or intermediate risk of recurrence.

Plus that we had a number of informal discussions with people that are affiliated or close to the Ministry of Health followed by formal discussions with the Ministry of Health. And it is only after all of those discussions that we decided to file based on the existing data in Russia.

In terms of the timelines, the historical precedence suggests that the Russian review period is about 12 to 18 months. Given that we filed in June of this year, we expect a decision around mid-year next year.

Okay. And then maybe I missed this earlier on the call as well, but can you give us an update on what's happening with Aroplatin at the Company, and anything new with (inaudible) of Oncopage?

Anything new with? Sure. Let me -- I apologize for leaving Aroplatin and our AG-707 discussion out. As you know, today's discussion was a bit longer than usual, and we decided that we would update those later. But let me just quickly give you an update. The Aroplatin program is on track. We have pretty much concluded our Phase I trial, and now we're looking at various protocols for the next trial using Aroplatin. And so far the evidence suggests that we have encouraging reason to believe the product should be advanced.

In terms of AG-707, we expect that trial to conclude sometime next year, and then based on the results we'll make the decisions on what the next steps should be.

With regard to [son of] Oncopage, in I think previous communications we may have conveyed to you that in order to prioritize our programs based on our current resources, we have put on hold a number of futuristic programs, and one of them is son of Oncopage. So, the program at a scientific level is alive, but we're not spending serious moneys on it because certainly we would like to preserve our cash and concentrate on opportunities that will have near-term positive effect on the Company and our shareholder value.

And can you -- this is the last question -- can you review for us the ongoing clinical trials, when we might see data from the ongoing clinical trials, especially, let's say the Aroplatin Phase I trial that's been recently completed?

Okay. So, ongoing clinical trial for Aroplatin was a dose ranging study designed to determine the maximum tolerated dose of the newly formulated Aroplatin. We believe there we're either at that dose or very close to that dose. So, based on that, we expect the trial to come to a conclusion very, very near term. And once that dose is determined, we will then look at the possibility of Aroplatin combinations with other existing drugs. And for those trials, the maximum tolerated dose of the combination will also have to be determined. So, the next trial will be a combination trial where we will select the optimal dose to go forward into a more pivotal setting.

And that will be, you think, sometime in, say, let's say third or fourth quarter of this year, or will that be more of a 2008?

That will be 2008, yes.

Okay. And are there any ongoing Oncopage trials for which we'll see some data from?

Right. So, the Oncopage ongoing trial is an investigator-sponsored glioma trial. The Phase I of that has come to an end and we're about to start a second, more extended trial. The first one had the participation of UCSF with a grant that was provided through the investigator's efforts, and now we expect an extended trial to be conducted at several additional centers, and that should start sometime this summer.

And the cash resources, is it still primarily being funded by grants, or will you also be contributing to this?

Yes, the second trial will also be funded by grants. What we do is basically provide Oncopage as a product for the purposes of conducting the trial.

Great. Thank you very much.

Your next question comes from [Kaliel Barrage]

Congratulations, Garo, on the Russian filing and actually on the Wall Street Journal article that appeared today, which I thought was very positive and described the company pretty well. In the article it was mentioned that you decided not to pursue the Phase III -- not to redesign and restart a Phase III on Oncopage renal cell carcinoma. Can you elaborate more on that? And I have another question on QS-21, if you can give us an update on the Glaxo relationship?

Certainly. Thank you. The question of why would we not opt to do a second trial at this time to meet with the conventional regulatory requirements that are needed particularly for the U.S. And the reason is a practical one. As you know, the first trial that we did took approximately 6.5 years. A repeat of that in a subset of patients would be another 6- or 7-year undertaking, And that would mean a Phase III development program that would be somewhere in the 12- to 14-year range, and it's a practical issue because no company irrespective of resources would really be willing to undertake a 12- to 14-year Phase III development program making a product development cycle close to 20 years. That would be impractical. The cost would be prohibitive, certainly, because it's not just the cost of doing another trial, but it's also the cost and all the associated costs of maintaining an infrastructure.

So, we estimated that repeating this would be a commitment of approximately $300 million or more over the next five to six years, and unless we are a philanthropy, certainly the sources would not be available to conduct such a trial. So, it was a practical decision not because we're defiant of the system or anything like that, but it is simply not possible. With Phase III programs in an adjuvant setting, if you will, these are earlier patients, trials are very long, and most of the guidelines designed at the regulatory agencies are really targeted for late-stage -- drug development in late-stage patients, which is a much shorter undertaking.

The other issue in our case is, as you know, while there are other drugs available for renal cell carcinoma, several which have been introduced recently, these are drugs for Stage IV patients. They're not for earlier patients, and in the patient population that we're targeting, there are no approved drugs available and the standard of care is simply surgery.

The reason for our enthusiasm is that in that population of patients which is a logical choice for cancer vaccines, we're seeing a very significant effect and hence our enthusiasm for our product.

And can you give us an update on the glioma trial, because that seems the initial feedback that we have gotten seems to be very positive. What are your plans regarding the glioma trial?

Yes, of course. As you know, the glioma trial, the initial trial was done by an investigator to sponsor the R&D funds provided by the grant to the investigator. In this trial, patients were treated with Oncopage and not only clinical responses were observed, but also we looked at immunological responses. The data was presented recently at a major conference.

Now, the most encouraging part of this trial, given that it's an early trial in a limited number of patients, simply 12 patients, the objective clinical responses are difficult to interpret because there is no reference on it. However, what's objectively interpretable in this trial is the fact that all patients, all, that were treated with Oncopage showed immunological responses. That is, post-treatment, they showed immunological activity that did not exist pre-treatment, and this difference was statistically significant and it covered all patients.

So, based on this, the physician presented the data, Dr. Andrew [Parsa], and also got the interest of several other centers to participate in the extended trial, and we're looking forward to the beginning of that sometime in the next month or so.

Garo, I hate to repeat the question again, but can you again elaborate on why you are excited about the Russian opportunity and why do you think that you have a good chance of moving forward?

Well, obviously, given the circumstance that we're in, meaning that our major handicap is conducting a subset analysis. Now, clearly, this subset is proclaimed to be the logical subset by all the experts that have opinions on this. However, by the traditional convention, it is still considered a subset, and that's why we have to explore more aggressively to see where could we register the product?

And Russia was attractive for a number of reasons. Number one, that we had a significant participation of patients from Russia. Number two, the trial that was conducted in Russia was done extremely well. Their enrollment criteria adherence was very high, and the conduct of the trial was very, very well done. The investigators collectively expressed a very, very high level of enthusiasm, and unanimous opinion as to whether the product was active in this patient population.

Now, if you couple all of that with the fact that the Russian market, because of all the economic work in Russia, is a major market, but it hasn't been in existence for very long because of limitations of the payment system in Russia and the distress of the people economically. That has dramatically changed over the last two years. The Russian market now is rapidly developing. Money is being allocated by the government, the participation of private pay patients is rising.

And so all of this coupled with the fact that the regulatory mechanism in Russia was willing to consider reviewing our data based on the existing trial results made us very enthusiastic that we may have an opportunity to market in Russia and certainly an opportunity to have the drug reimbursed. And so that's the reason the impetus for Russian filing.

How about, Garo, other European territories? What are the initiatives that you are undertaking there?

Right. The most logical next step for us is to pursue other CIS countries, which have the same dynamic as Russia. One logical choice that represents a relatively significant population is Ukraine, so we're looking at our options of filing in Ukraine.

Additionally, in Europe we've had meetings with several very, very key opinion leaders, and when we talk with these opinion leaders and (inaudible), by the way, true in the U.S., is that there is a very high level of unanimity that the product they believe is active in the intermediate risk population. However, the hurdles are regulatory hurdles.

So, we are confronted with a situation where practicing physicians believe that Oncopage is active in the intermediate risk patient population because of the fact that the hazard ratio is 0.55, and the P value is highly statistically significant in spite of the fact that we have to call it a nominal P value since it's a subset analysis.

So, in Europe, we're now looking at our options. In fact, we have a number of meetings coming up, board meetings in Europe, and we will investigate to see what's the greater thought process is by a wider number of physicians who are specialists in this area. And (inaudible) we plan on meeting with the EMEA and presenting a case to the EMEA, to see if they will concur, just as Russia has, with our efforts to file with the EMEA under a provision in Europe, which is called Conditional Approval, that's not available just yet in the U.S.

So, under Conditional Approval, we may be able to market our product provided that a condition between us and the EMEA is agreed upon.

Garo, one last question on Oncopage and then we can move to QS-21. What is the size of the -- what is the current size of the renal cell carcinoma market in Russia, and what are the treatment protocols today?

The size of the market is approximately one-half of what it is in the U.S., and that's pretty much consistent with a relative ratio of the population in Russia versus the U.S. In terms of the standard of care in the patient population that we're targeting, the standard of care is a nephrectomy, either full or partial nephrectomy, followed by observation, which is, by the way, the same standard of care in the U.S. A very high similarity.

Now, these patients are observed until they relapse, and once they relapse then they're treated with [Sutan], Nexavar, and other investigational treatments.

Okay. So, can we move to QS-21 and update on the Glaxo relationship?

Certainly. As you know, in July of last year we restructured our agreement with GlaxoSmithKline, and that restructuring met the needs of both companies. That is, as GlaxoSmithKline neared marketing of some of their products that contain QS-21, they wanted to make sure that their supply requirements were assured. Prior to that restructuring, we were the only designated supplier to GlaxoSmithKline of QS-21.

In other words, they did not have the right to make the product themselves. We were the only source of supply. And as they were nearing product launch with a number of their products, they got nervous that that would expose them, particularly since some of these products had multi-million dollar revenue potentials. And this restructuring allowed them to make some product themselves, gave us the right to supply them until 2014, and also from our perspective made the royalty stream much more certain for us.

Prior to this restructuring of the agreement last year, there were step-down provisions that were somewhat uncertain in terms of the royalty rates. All of these were removed. There were also some uncertainties regarding the duration of their obligation for royalty payments to Antigenics. And so we took care of both of these ambiguities with the restructuring.

In the most recent change, what we're doing is basically allowing them to manufacture their QS-21. All of their requirements of QS-21, if you will, immediately in return for a reimbursement to Antigenics for an estimated amount spread over some years that would have been due in the form of revenues from manufacturing to Antigenics. So, this has nothing to do with the royalty component of the relationship; it strictly concerns the revenues that would have been due to Antigenics should we have supplied GSK with QS-21 over the next six years or so.

Okay. Thank you very much, Garo, for the update.

Your next question comes from Stephen Solomon.

Hello?

Yes.

Yes, I was hoping to ask a couple of questions, one on the -- I know you've been asked a lot on the Russian market today, but could you maybe talk a little bit about the revenue potential in Russia, what you think peak sales could look like, or maybe help us to see what that could mean? and then, also, if you could talk about the Russian regulator and if they have a track record, if they have approved any drugs based on post hoc analysis in the past? And then I have one other follow-up, if you've got a moment.

Of course. Let me address the second question and then I'll go to the first one. The market in Russia up until 2005 consisted strictly of generic pharmaceuticals and nothing beyond that because of the affordability issue. So, Russian market is a relatively new market and there is really no precedence in that market for anything. Just as there was no precedence for Moscow being the most expensive city in the world, it is today. There is really no precedence for it, any of the questions that you've asked. Now, that doesn't mean that because of no precedence something should not be explored, because if we were to go on the basis of only precedence, there would be no innovation of any sort in the world.

So, the next question is while there is no precedence, is it realistic that, number one, the most important questions for us are, one, could the product be approved in Russia, and, two, if the product is approved, could we get paid for it? Because if the product is approved and we can't get paid for it, what good is that approval? And it is only through our comfort level that has been established. And it's not an absolute answer, but it's a comfort level that has been established through our discussions with the physicians in Russia, regulators, and also a system of payers that we feel comfortable to proceed. And so no precedence in terms of any guarantees that could be provided, but certainly a promising market.

Let me come to the first question of potential in renal cell carcinoma. If you take into consideration the patients that will be in the space that we're targeting, and clearly this would be a function of pricing. Now, the encouraging thing about pricing is that while we don't intend on pricing Oncopage at ridiculous levels, it should be noted, however, that a product like Avastin, Gleevec, Herceptin, Rituxan and so on and so forth, are selling at or being reimbursed at or above U.S. prices currently in Russia. So, that's the market estimate approximately.

Now, the other issue for us, is there a path for us to go beyond renal cell carcinoma without having to do a 500-person or 1,000-person trial in each and every indication? And the answer to that question is unknown to us right now. We're looking into it and we're having various discussions because, as you know, Oncopage is not just a renal cell carcinoma product; it is a vaccine made from one's own tissue and hence it's applicable, theoretically, to a wide range of cancers, and we're very interested in pursuing a number of other indications. And with those, the opportunity in Russia could be very, very significant.

Of the 16,000 patients, just going back to renal cell for a second, how many do you think would be able to pay and/or get reimbursement?

Okay. That is something that will be certainly negotiated. Just let me answer that question in one way. When we conducted our trial, Russian participation in our trial was the quickest enrollment of any region. So, we're dealing with a relatively sophisticated medical system that can provide at least the prerequisite requirements for being able to make Oncopage for patients. Meaning that a fair number of patients are being nephrectomized and tumors are available to make Oncopage.

Now, the next issue will be strictly based on regional and federal government negotiations, which initial -- we're in the very initial stages of that process.

So, do you have a sense in terms of the percentages, maybe a quarter of those 16,000 patients, or something like that, or --

Our target is somewhere between 1,500 and 2,000 patients.

Okay. And then lastly, you said that you've got financing to hold you into 2008. Just, again, curious to get your sense of what you see as your financing options here, if you can be any more specific, I guess. In the past you've said looking for non-dilutive options, but I'm just wondering if maybe you can put a little bit more meat on that answer?

Okay, let me ask Shalini to address that question. Shalini?

Okay. So, Steve, you're right, what we've disclosed is that we feel our current cash balance is sufficient to last into 2008. Obviously, we're always keeping an eye out opportunistically for financing options. And, as you noted rightly, we are always also on the lookout for options that are as undilutive to current shareholders as possible. If you look at the convertible note deal that we did last year in the October, November time frame, it was quite an unorthodox structure and it resulted in something like a 74% (inaudible) to market in terms of the conversion price, which is not typically what you would see because of some of the additional features we put there.

So, as you well understand, I can't go into a lot of detail in terms of the specifics of what we're currently considering, but it's certainly high on our priority list to execute something in the near term.

Right. But do you think you've got room to do another convertible deal?

Well, like I said, I don't want to go into a lot of specifics in terms of exactly what kinds of deals we're looking at at the moment. Unfortunately, we'll have to wait and see what we close and we'll give you the full details with pleasure at that time.

Thank you very much for the answers. I appreciate your time today.

Your next question comes from Gabe Hoffman.

Thanks for taking the question. Good morning, Garo. I was curious with respect to the Russian market you've talked about, some numbers. I guess you mentioned that according to RMBC, a Russian data provider, is RMBC actually -- what does that stand for so that we might be able to look up sort of any reports they might have on our own? And was curious within that Russian oncology market valued at 387 million, I mean, just to get some sense of the potential size out there for Oncopage, what's the top selling drug in that market?

First of all, with regard to reports, I suggest that you get in touch with our Investor Relations office and we'll provide you with the full references, because there are a number of reports that have been published. Most recently there is a pretty extensive report by Price Waterhouse that discusses the opportunities in E7 countries, the leading country of which is Russia, clearly. But we'll be happy to provide you with all those references.

With regard to the top selling drugs, right now the top selling drugs in Russia and, as I said, some of these are experiencing 100% to 300% growth per year. This year a few of them will be approaching $100 million in size. They include Gleevec, Herceptin, Avastin, Rituxan, and I believe oxaliplatin.

So, that's 100 million --

Velcade is included in there as well. Velcade.

Right. So, that would be 100 million for all of them put together, or 100 million each?

No, that would be -- a number of them are approaching the level of $100 million each.

Okay, that clarification.

Just so you know from a reference perspective, in 2005, the market was tiny. It's now approaching a billion dollars, the total market in terms of revenues. And that number is expected to be quite significant by 2010.

Sure. And I was just curious about financing options. It looks like if we do the math on some of the milestones that you're going to receive in the third quarter, we look at the current cash balance of 25 million, we make some forward burn projections, it looks like plus or minus a couple of million, the number, the cash balance would be about 10 million by the end of the year. Is it safe to assume that we're going to have to -- we're going to have to address the cash balance certainly between now and the end of the year?

I think Shalini answered that question, but I will let her answer it again.

I think it is safe to say we're looking at a number of options at the moment. If you look at all of our filings, we always said that we had cash sufficient into 2008, and prior to that time we would conclude further financing. So we are currently looking at those types of options and I would not be surprised if you were to see something -- one more financing options closing by the end of the year.

Great. Thank you so much.

Your next question comes from Sihad Asphar. Mr. Asphar?

Can you hear me?

Yes, sir, your line is open.

I was wondering, (inaudible) around the $3 range? I was wondering -- and I see that (inaudible) is in the Phase III. How long it would take for it to get approval from the FDA?

The question is, are you asking for how long it will take to get approval of Oncopage or QS-21?

Well, actually, both.

Both, okay.

I see both are in Phase III.

Right. So, I think we've addressed the issue of the FDA, that we do not expect or we're not optimistic that we will get Oncopage approved by the FDA based on the current data. I've addressed this issue and I will address it again in the near term in some detail with my correspondence through my blog. However, we do expect Oncopage, or we're hopeful, certainly, that we'll be able to have traction in terms of commercialization activities in other parts of the world.

Now, in terms of QS-21, as you are aware, most of those -- in fact, all of those development programs are in the hands of our licensees. Essentially, all of them are pursuing trials that are designed to be submitted both the FDA, EMEA, other major regulatory bodies around the world. And as we updated in the main text of our talk today, QS-21 has advanced into Phase III programs in the last six months. Some also have advanced into Phase II programs. So, that pipeline is moving forward at a very rapid rate and we're hopeful that we will start seeing some revenues from royalty income concerning QS-21 as early as perhaps 2009 or 2010.

But can you expect approval from the FDA any time soon?

For QS-21 based products?

Yes.

The earliest would be 2009.

Earliest, okay. Also, I was looking at Dendreon Corporation. How is QS-21 concern (inaudible)?

Which corporation, I'm sorry?

Dendreon Corporation.

What's our question about Dendreon?

I was looking at the product they're developing is very similar to QS-21?

Yes. Okay, so, there are similarities and no similarities as well. The similarities that there's an autologous component to the Dendreon product, but it is a cell-based product and our product is autologous in its entirety, and it is not a cell-based product, it's a purified protein therapeutic. \

So, when you talk about autologous products, there are two issues that one needs to consider. One is the clinical data, and clinical data is the same whether it's an autologous product or not autologous product, at least the considerations for the clinical data will not vary very much from autologous to not autologous, or off-the-shelf products. The other one is the CMC issues, and in our case we believe that we have addressed most of the CMC issues, if not all of them, to at least the satisfaction of even the FDA.

Okay. Thank you very much.

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