Agenus Inc (AGEN) 2007 Q3 法說會逐字稿

Good morning. My name is Katora and I will be your conference operator today. At this time, I would like to welcome everyone to the Antigenics third quarter 2007 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) Mr. Anstey, you may begin your conference.

Thank you, Katora, and good morning, everyone. Welcome to Antigenics' conference call to discuss the financial results for the quarter ended September 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 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, but not limited to, statements regarding the potential clinical benefit of Oncophage in kidney cancer based on a subgroup analysis; activities and potential strategies for pursuing marketing registration and commercialization of Oncophage and the potential for marketing approval or conditional approval of Oncophage in certain jurisdictions such as Russia and Europe; present and future clinical trials for various product candidates of the company and related enrollment expectations; the advancements of products using QS-21 by Antigenics' licensees; and financing goals of the company. 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, decisions by regulatory authorities and the potential that the opinions of regulatory authorities may differ from those of the experts with whom the company has consulted; the ability to secure local distributors or reimbursement mechanisms in any jurisdiction in which we may seek to obtain product approval; the ability to raise capital and finance future development of Oncophage; Antigenics' dependence on its collaborative partners such as GlaxoSmithKline to successfully develop and commercialize products containing QS-21; the scientific risk associated with the development of vaccines; the competitive risk that other sources of competitive adjuvants could become available; difficulties and delays in manufacturing QS-21; and the factors described under Risk Factors of Antigenics' Form 10-Q as filed with the SEC on August 9, 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 capital expenditures, 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 quarter.

Thank you, Robert, and good morning, everybody. I will now review our financial results for the quarter ended September 30, 2007.

For the third quarter of 2007, Antigenics incurred a net loss attributable to common stockholders of $11.5 million, or $0.25 per share. This is compared with $11.2 million, or $0.24 per share, for the same period in 2006. For the nine months ended September 30, 2007, Antigenics incurred a net loss attributable to common stockholders of $30.4 million, or $0.66 per share, compared with $40.9 million for the same period in 2006. Antigenics recognized revenues for the nine months ended September 30, 2007, of $4.7 million, compared with $372,000 during the same period in 2006.

Revenues are comprised primarily of the sale and supply of QS-21, our vaccine adjuvant, which is licensed to a number of corporate partners.

Research and development expenses for the nine months ended September 30, 2007, were $18.1 million, compared with $22.6 million for the comparable period in 2006. General and administrative expenses for the nine months ended September 30, 2007 were $13.3 million, compared with $16 million in 2006. Our net burn rate for the nine months ended September 30, 2007 was $21.1 million, compared with $40.5 million for the same period in 2006. Our results for 2007 reflect the company's efforts to maintain a low rate of net cash burn, and an increase in revenues associated with upfront milestone and manufacturing payments from our QS-21 licensees, among other factors.

We had $24.9 million in cash, cash equivalents and short-term investments at the end of the third quarter. This cash balance reflects the receipt of $5 million in gross proceeds from the previously announced sale of common stock and convertible preferred stock in September. We believe our cash balances are sufficient to fund our operations into 2008. We are currently in the process of arranging for one or more financing transactions in order to generate additional funds with the goal of minimizing dilutions to shareholders as much as possible as we have done in our recent financing. We are, of course, unable to provide further details of any contemplated financing transactions at this time.

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

Good morning, everyone, and thank you for participating today. I will now provide an update on the company since our last call.

This quarter has been an exceptionally busy one for Antigenics as we continue with the implementation of our regulatory and commercialization strategy for Oncophage in Europe and Russia. As you know, in May of this year, we completed a data analysis of our Phase III kidney cancer study that included an additional 17 months of follow-up from our initial data announcement.

To quickly summarize the data, with the primary endpoint of recurrence-free survival, we are seeing a greater than 45% reduction in the recurrences in earlier stage patients described as intermediate risk patient, using ECOG criteria, who were treated with Oncophage. Just as a reminder, ECOG is the Eastern Cooperative Oncology Group. This group represented 362 patients, which is 60% of the patients enrolled in the trial. These results were achieved with a P-value of 0.004 and a hazard ratio better than 0.55. A trend in overall survival, the secondary endpoint, was also seen, consistent with the recurrence-free survival data. As of March 31, there were a total of 25 deaths in the control group, or 14%, as compared to 15 deaths in the Oncophage arm, or 8.2%. While this difference is not yet statistically significant, the rate of reduction in deaths is very similar in percentages in the rate of reduction of recurrences that we have seen in the trial.

Based on the advice of key opinion leaders and regulatory experts, we are moving forward with regulatory and commercial plans in multiple geographies. We have met with a number of the most prominent key opinion leaders in the fields of oncology and urology in Europe as well as key regulatory experts. The goals of these meetings and advisory board panels have been two-fold. One, to get an expert review of our data to obtain consensus on whether the results are clinically meaningful and robust, and two, to get an assessment of whether we should pursue a filing in Europe.

Based on the advice we have received thus far, we expect to request a formal meets with the EMEA shortly to discuss a potential filing for conditional marketing authorization of Oncophage in the European Union in renal cell carcinoma patients with earlier stages of disease.

I will quickly summarize the conditional approval mechanism for those of you who are not familiar with it. Conditional approval is a relatively new regulatory approval mechanism that was introduced about two years again in Europe. A product that receives conditional approval can be marketed similarly to other drugs except that an annual evaluate must be performed by the regulatory authorities until all post-marketing commitments are fulfilled.

There are four general requirements for products to be eligible for conditional approval. One, the indication must be an orphan indication or be a serious, life-threatening disease. Two, there must be an unmet medical need in that indication. Three, the risk/benefit balance must be positive based on what information is available, but the data can be less than comprehensive. And four, comprehensive data must be generated by ongoing or new studies.

It is our belief that Oncophage fulfills the first three of these requirements and, of course, we will gladly initiate a confirmatory study to generate comprehensive data in order to satisfy the fourth condition after we have commenced commercialization under the conditional approval mechanism.

While we are in initial stages of executing on our regulatory next steps in Europe, we are much more advanced in Russia, whereas you know we have filed for approval this summer. The review of our application is ongoing, and we expect to hear from the Russian Ministry of Public Health by mid-2008 at the latest. In anticipation of a possible approval, we have initiated our pre-launch activities for the Russian market. We have begun to identify and work with distributors for the product, as well as to identify multiple avenues for achieving proper reimbursement. Both of these efforts are intended to make Oncophage available to as many intermediate-risk Russian renal cell carcinoma patients as possible. I will remind you that the massive expansion of Russia's state-based reimbursement programs largely drove this market to be the fastest growing pharmaceutical market in the world last year. And very importantly, oncology is one of the leading segments in this phenomenal boom.

As you can see, we have identified two potential pathways to beginning commercialization of Oncophage in kidney cancer, based on Phase III data we have generated to date. We are committed to exploring additional commercialization opportunities, including in Canada and the U.S.; however, we have prioritized Europe and Russia for the time being for all the reasons that we have outlined.

We recently announced some very exciting news about Oncophage that goes beyond kidney cancer. Last week, a presentation was made at the AACR, American Association of Cancer Research, meeting providing updated results from the Phase I portion of our study in recurrent glioma. As you recall, this study is being conducted at the University of California, San Francisco, under Dr. Andrew Parsa. Dr. Parsa has done a phenomenal job with this trial. He has been able to procure outside funding for it, but most importantly, he has been able to demonstrate the great potential of Oncophage in a previously untested indication.

The data that was recently presented is summarized as follows.

Twelve patients with recurrent high-grade glioma were involved in the trial. They then had as much of their tumor resected as possible from which Oncophage was processed. All 12 of the patients demonstrated a significant immune response after vaccination as compared to baseline immune response prior to vaccination. The immune response data was statistically significant with a P-value of less than 0.001. Additionally, 11 out of 12 patients exceeded the historical median benchmark of 6.5 months survival from time of recurrence. Median survival time for the patients is, in fact, approaching 10 months and has not yet been reached. One patient, expected to live 3-1/2 months, is still alive at two years after treatment. These are early findings, will of course require confirmation in one or more larger studies, but they are very encouraging.

And these data have been used as the basis for a Phase II trial that was initiated in early October. The trial will enroll 30 patients with overall survival as the primary endpoint. However, in this portion of the trial, we will limit the number of recurrences that patients may have in order to enroll healthier patients who are expected to be better responders to vaccination approaches in general, as you know.

Now, I will move on to QS-21, our vaccine adjuvant which is included in more than 20 vaccines in development by several licensees.

Substantial advances have been made this year with vaccines containing QS-21. In total, there are 16 now clinical stage vaccines that utilize QS-21. Two are in Phase III, ten are in Phase II and four are in Phase I. Examples of these include GlaxoSmithKline's Phase III lung cancer vaccine, Elan and Wyeth's Phase II Alzheimer's disease vaccine and Acambis' Phase I influenza vaccine.

This quarter also brings positive data on GlaxoSmithKline's promising malaria vaccine. While GlaxoSmithKline is developing numerous vaccines that contain QS-21, their vaccine for malaria gets a lot of attention due to the fact that malaria continues to be one of the world's top three killers and that there are no vaccines that are commercially available at the moment.

Furthermore, GSK's malaria vaccine has been widely studied with more promising results than any other malaria vaccine candidate in development. It has even attracted investments from Bill and Melinda Gates Foundation due to its great potential.

In October, the most recent study of GSK's RTS antigen-based malaria vaccine was published in the Lancet. This double blind, randomized Phase I/II trial enrolled 214 infants in an area of Mozambique with endemic malarial infection. The patients were randomized to receive either three doses of malaria vaccine, or the hepatitis B ENGERIX-B vaccine. Safety was the primary endpoint and the vaccine was well tolerated and adverse events balanced between the arms. Study also measured immunogenicity. High titers of antibodies against the antigen were observed. But most importantly, during the three-month follow up period, malaria infection was observed in 22 infants in treatment arm as compared to 46 in the control arm, indicating vaccine efficacy of 65.9%. The P-value associated with the efficacy was less than 0.0001. These are very encouraging findings, which are the, essentially the best to date in this difficult indication. And now, they set the stage for a Phase III testing of the product.

We're excited by these results for two reasons. Not only will the commercialization of an effective malaria vaccine that contains QS-21 yield financial benefits for GSK and Antigenics, but it could represent one of the most significant advancements in global public health in recent times.

In the context of other vaccines under development containing QS-21, including those for lung cancer, Alzheimer's disease and multitude of other targeted diseases, it is clear that the adjuvant is enabling the development of vaccines with a dramatic potential impact on the host of critical diseases facing us today.

In closing, Antigenics currently has a multitude of projects in the works. Oncophage is moving ahead through our global regulatory strategy as well as with out expanded Phase I tiglioma trial. Phase I Aroplatin and AG-707 data, in solid tumors and genital herpes respectively, are expected early next year. And, of course, development of the vast pipeline of QS-21 containing vaccines is on course and advancing. The next few quarters should be a very exciting time for Antigenics as we get important readouts from all three of our major in-house programs, and I look forward to announcing these developments to you as they occur.

Thank you very much for your attendance. We should now move on to the Q&A session. Robert?

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

Thank you, sir. (OPERATOR INSTRUCTIONS)

Your first question comes from the line of Brian Klein with Rodman & Renshaw.

Hey, this is Ren Benjamin from Rodman & Renshaw. Thanks for taking the question, Garo, or questions. A couple of them, lets start off with Oncophage. Can you give me, give us some more of an idea as to the timing, as to when you will request a formal meeting with the Europe agency. And then, maybe the steps involved. So, for example, once you request the meeting, is there a review period that goes on for a little while and then you get a decision, or do you get a decision that day itself as to whether or not you should proceed? Can you give us some details there?

Certainly. It is highly probable that we will request the meeting within the next 30 days. And then, typically, the European agency has up to six, or sometimes seven months to grant us that meeting. It could happen sooner, but the typical period is about six to seven months. At that meeting, when we go to that meeting, we will basically be near at a state of filing for the data. And we will have an answer from the agency as to whether or not to go ahead. If we get an answer that is positive, we would be ready to file within 30 to 60 days of that meeting.

So you'll get it, once you actually meet with them, you'll get an answer right there and then, whether you should file.

That's correct.

Okay. When you were talking with the thought leaders of, let's say, in Europe, I guess in ball park figures, how many people did you meet with and was it a unanimous sort of vote that you should go and request a formal meeting with the EU agency?

Okay, so, let me tell you, let me break down the number of experts we met in different geographies. In total, we have met with over 100, both oncology and urology, experts around the world. Amongst them have been about three dozen of the very top experts from Europe. And the answer is yes, it is a unanimous opinion that we should go to the agency to request a conditional approval.

Okay, and then, regarding the conditional approval, you nicely outlined four of the requirements, of which three have already been qualified by you guys and Oncophage. But the fourth one, does that need to be in place or is that something that they will allow you to start or to do once commercialization occurs.

I think we need to agree on what that fourth one will have to be at this meeting that's coming up and implement it as expeditiously as possible. And there is an annual review process to make sure that we're kept honest in our commitments to fulfill that fourth requirement. In other words, if we happen to agree on the structure of a trial to fulfill that fourth requirement, the agency wants make sure that that trial is well underway and is being executed promptly and that review will take place every year.

Okay. You mentioned that both the U.S. and Canada are still on your grid, but clearly Russia and Europe have taken priority. If, no matter what happens to Russia and Europe, whether it's successful or not, how, what will, what are the plans for the U.S. and Canada? Do you wait for those decisions to complete first and then, how do you see it moving forward?

At this point, us moving forward with regard to Canada is simply a resource issue. As you know we are a company with rather modest resources. We are a fully integrated company; however, the programs that we're undertaking are enormous relative to the size of our company. That's why we have prioritized Europe and Russia, because those are more near-term opportunities as well as the fact that they each represent significant patient populations.

In terms of Canada, there is precedence in Canada for cancer vaccine approvals even though their first approval was, has not translated to a commercially successful product because of specific nuances that are associated with it. Canada has had a record of prioritizing scientific reviews and trying to base determinations on both regulatory and scientific considerations. So, there's precedence there and I think, as soon as our resources are freed up from Europe and Russia, we will be concentrating on Canada as well.

In terms of the U.S., there is currently no regulatory mechanism by which we can get approval based on the analysis of the data that we have completed thus far. However, as I may have alluded to in my last conference call, there is a movement in the U.S. While there is no certainty as to where this movement is going to take us, there is unquestionably a movement and that movement involves how does one meet the challenges of the regulatory process when it comes to cancer vaccines. The agency along with the NCI had a two-day workshop back in February of this year to, sort of, start this process. And we have been, as a company, very active with independent associations who are furthering this cause. We're also working with the agency bringing these issues to their attention so that, hopefully, a consensus will develop to draft guidance in order to be able to make allowances for products such as ours which, number one, represent a new class of compounds and number two, they are best applicable for the adjuvant patient population. For example, there was a groundbreaking paper published by the head of biostatistics at the NCI, Dr. Richard Simon, very recently and this paper, the reason I call it a groundbreaking paper is because for the first time a suggestion was made that logical subset analysis, that are defensible by biological and scientific criteria, should be allowed in the approval process. This has never happened before and so there is definitely a movement. Now, our intention is, while we will participate in trying to work with the appropriate agencies and scientific institutions to further this cause, until there is guidance in place, it would make no sense for us to attempt to file in the U.S.

Gotcha. I guess just one, well, two more questions. One is regarding the glioma study, you mentioned 11 of 12 exceeded the 6.5 months you would typically expect with the historical control. Do you have any data regarding whether or not those patients have progressed and once they've progressed, what are their therapeutic options? Are they, what exactly is happening to them after they've progressed?

I'm not a specialist in the field of glioma but typically when these patients progress there really are no other options. General, they are provided with radiation therapy which is more palliative then anything else but it has it's own set of handicaps. A number of our patients have progressed after vaccination but the numbers that we have provided you with are survival numbers. So, even if patients progress, we can see a prolongation of survival which we seem to have seen in this trial with the caution that it's a single arm trial, and certainly we need to be cautious about citing these numbers. What's very encouraging about the trial, and that's not disputable, it is based on objective criteria, is that all 12 of the patients have responded immunologically to vaccination against their own tumors. And this has been accomplished by means of a very sophisticated immunological testing conducted by Dr. Parsa which clearly demonstrates that our vaccine is doing what it is designed to do in the body in terms of it's effect on the immune system.

Okay. And then my final question, can you just remind us again as to when the first of the QS-21 vaccines is scheduled, or is likely to be reporting either clinical results or achieving commercialization.

Certainly. As you know, we are bound by agreements with each one of our licensees. As part of those agreements our licensees provide us with a status report that tells us how many of their products are using QS-21, which stages these products are in and what the commercialization timelines are. Based on that, without being specific in terms of which licensee it is which product it is, the first of these products will be commercialized, or has been signaled to us to be commercialized, in the 2009 timeframe. And, based on the numbers that I provided you with, in terms of where we are with regard to how many of them are in Phase III development, Phase II and Phase I and so on, we expect a significant number of vaccines continuing QS-21 to be introduced to the market in the 2011 through 2013 timeframe. So the first one is expected to hit the market in 2009 and then in the band of 2011 and 13 there's a substantial number that are expected to be commercialized.

Perfect. Thank you very much and good luck.

Thank you.

(OPERATOR INSTRUCTIONS) Mr. Anstey, at this time there are no questions. Please proceed with your remarks.

Thank you. So, to close the call I'd like to remind listeners that a replay of this will be available approximately two hours from now through midnight Eastern time on November 15, 2007. Please dial 1-800-642-1687 from the U.S., or 706-645-9291 internationally. The access code is 19740931. 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 1-800-962-AGEN, or 1-800-962-2436. Thank you.

This concludes today's Antigenics third quarter 2007 earnings conference call. You may now disconnect.