Agenus Inc (AGEN) 2010 Q1 法說會逐字稿

Good morning. My name is Celeste and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2010 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).

I would now like to turn today's call over to Ms. Sharp, CFO. Please go ahead.

Thank you, Celeste, and good morning, everyone. Welcome to Antigenics conference call to discuss the financial results for the quarter ended March 31, 2010. With me today is Dr. Garo Armen, Chairman and CEO.

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, and we will then have a Q&A session.

But before we continue, I'd like to remind you that this conference call will contain forward-looking statements, including without limitation, statements regarding the Company's strategic priorities; cash position and potential revenues and savings; and the development, regulatory, and commercialization efforts; clinical trial activities; data, results and timelines of the Company and/or its licensees and partners.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. References to these risks and uncertainties is made in today's press release and they are disclosed in more detail in our most recent filings with the US SEC. When evaluating Antigenics business and securities, investors should give careful consideration to these risks and uncertainties.

For the purpose of this call, the phrase net cash burn means cash used in operating activities plus capital expenditures, debt repayments and dividend payment. With that, I will now review our financial results for the quarter ended March 31, 2010.

For the quarter ended March 31, 2010, Antigenics incurred a net loss attributable to common stockholders of $9 million or $0.10 per share. This is compared with a net loss of $9.7 million or $0.14 per share for the same period in 2009. The 2010 figure includes $4.5 million in non-cash expenses such as depreciation and amortization, share-based compensation, non-cash interest, et cetera. The 2009 figure includes only $2 million of such expenses.

Antigenics recognized revenues in this quarter of $936,000 compared with $621,000 during the same period in 2009. The increase is primarily due to timing of shipments of QS-21 to our licensees. In the quarters ended March 31, 2010 and 2009, we recorded revenue of $378,000 and $380,000 respectively from the amortization of deferred revenue that was received previously.

Research and development expenses in the first quarter of 2010 were $4.6 million compared to $4.9 million for the comparable period in 2009. G&A expenses in the first quarter of 2010 were $3.6 million compared with $3.9 million in the first quarter of 2009. These decreases reflect our cost containment efforts.

Cash, cash equivalents and short-term investments amounted to $23.9 million as of March 31, 2010. Our net cash burn for Q1 2010 was $6.1 million compared with $9.8 million in 2009. This reduction reflects primarily our cost containment efforts. We continue to anticipate that our net cash burn for the full year 2010 will be in the range of $16 million to $18 million.

Subsequent to the end of the quarter, we issued approximately 954,000 shares of common stock in exchange for $2.3 million in face value of our 5.25% convertible notes. This will result in the savings of about $120,000 in interest expense per year going forward.

The original principal of these notes was $50 million, of which approximately $17.7 million remains outstanding after a series of exchange and purchase transactions. Also, as of Monday, the Company has regained compliance with NASDAQ's $1.00 minimum bid price listing requirement, and that matter is now closed.

This concludes the financial portion of the call. I'll now turn the call over to Dr. Garo Armen.

Thank you, Shalini. I will begin my comments by first addressing our strategic priorities for the year. These include improving our balance sheet, operating at a reduced burn rate, and continuing to create value based on our broad immunology platform, which includes our licensed adjuvant, QS-21, Oncophage, and AG-707, which is now herpes simplex 2 therapeutic vaccine candidate.

With regard to our balance sheet, the objective for the year is to continue to reduce our debt levels. As Shalini mentioned, we've already purchased approximately 32.3 million of the 50 million publicly held convertible debt outstanding. These purchases have reduced our annual interest expense by some $1.7 million a year.

In addition, we've cut our overall burn rate. This year, we will be at the rate of less than half of where we were just about two years ago. We continue to look for means of reducing it further by improving operating efficiencies further; and in addition, our desired objective is, of course, to bring partners to complete the development of Oncophage and AG-707.

Partnering these programs would optimize the potential for growth, giving the [opportunity], for example, of Oncophage to many types of cancers with a partner, we can help -- we can see and envision starting two pivotal trial programs in multiple cancer indications. Since our last conference call, we have had several meetings in this regard with prospective candidates for partnering Oncophage.

AG-707 would also benefit with the resources that a partner can bring to the table. We expect to be presenting the data from our recently completed Phase 1 trial at one of the prominent upcoming conferences, and we also expect to submit an article on the result of this trial to a peer-reviewed journal very soon. Our efforts to explore a potential partner for AG-707 development will commence very shortly and will be timed with these activities in an attempt to achieve maximum exposure.

I will now provide an update on specific progress regarding our ongoing Oncophage trials in glioma. As you know, we currently have two investigator-sponsored Phase 2 clinical trials testing Oncophage in recurrent as well as newly-diagnosed glioma patients. These trials are being held -- or I'm sorry -- these trials are being led by Dr. Andrew Parsa at the University of California in San Francisco.

These trials are externally funded by patient advocacy groups and by the National Institutes of Health. The trials will evaluate overall survival, progression-free survival, and immunological response. As you remember, we have measured these parameters in previous trials, but the importance of this trial is that it measures all three in one single trial.

Dr. Parsa is scheduled to present results from the recurrent glioma program at the International Conference on Brain Cancer Therapy in Germany on May 20, so that's in a few weeks. In addition, he will also be presenting on the subject of vaccine therapy in glioma at the American Association of Neurological Surgeons Conference on May 4.

Just to recap, the most recent reported data from the recurrent glioma program showed that in the first 20 patients treated in our Phase 2 portion of the trial with Oncophage, median survival was 10.1 months, with six patients surviving [ever] beyond 12 months. The previous long-established historic [cold] median survival for this population is 6.5 months.

Next, a quick update on Russia. We're pleased that the commercial launch has taken place. We recognize that the private paying market in Russia is limited; thus we consider and continue to explore local distribution partners who might support potential broader commercialization, as well as efforts to update government reimbursement for Oncophage in Russia.

Regarding our activities in Europe, over the past month, we've held meetings with regulatory agencies from select European countries to help us decide whether or not it makes sense for us to submit our application for Oncophage in renal cell carcinoma. We plan to continue some additional follow-up work on this, and we will decide in the second half of this year whether or not it would be prudent for us to risk [med].

I will conclude my remarks with QS-21. QS-21 is currently being tested in 15 clinical stage vaccine products. We expect the first QS-21 product will be launched in 2012/2013 timeframe; after which we will be entitled to receive royalties on sales. Royalties are payable for 10 to 15 years after launch, depending on the product.

Prior to launch of QS-21 in commercial products, we're currently generating modest revenue. This is unique as an asset for us in the biotech field, because it offers a tremendous pipeline diversification, and 100% of the partner-funded programs are out of our income statement. So that significantly de-risks the QS-21 from the Antigenics perspective, allowing significant potential upside with no financial risk to the Company from a development perspective.

With that, I will conclude my remarks and I think we're now ready to take questions.

(Operator Instructions) Ren Benjamin, Rodman.

Good morning, guys, and thanks for taking the questions. I guess maybe just starting off with some more details regarding the clinical update. Garo, you mentioned that we'll be seeing some recurrent glioma data. Can you refresh for us, please, what the size of the trial is intended to be? How many patients will get an update on May 20 and what are the endpoints that we should be concentrating on?

As you know, Ren, this trial is designed to enroll 50 patients and we have completed the enrollment of 30. So the trial will report on the mature portion of that enrolled 30 patients. In terms of what will be reported, the previous trial had shown survival data, which favorably compared to historically published data; but very importantly, the first trial that we completed showed that 11 of 12 patients tested immunologically showed a patient-specific immune response. And we're talking about a T cell mediated or CD8-mediated immune response.

The new response data from the current trial will probably take a little bit more time to mature, but I expect that Dr. Parsa will most likely talk about the survival data on the mature portion of the patients that have been enrolled.

Okay. And then can you just give us an update on the newly diagnosed group of patients, that second Phase 2 trial that's ongoing?

That's the one I'm talking about. That's the trial that is going to enroll 50 patients and 30 have been enrolled. That's the ongoing trial.

Oh, that's the newly diagnosed, got it. So you had mentioned early on that there were two Phase 2 clinical studies underway. I assume that they were both by different physicians, one by Dr. Parsa and one by someone else, is that incorrect?

Well, as you may know, we expanded the enrollment to two additional centers, so this is the same trial. We have two separate trials, but we have expanded the enrollment to two additional centers for the larger trials to speed up enrollment, and also based on the interest that was expressed by these additional centers. One is Columbia University Hospital in New York and the other one is the Case Western Hospital. So the investigators from these trials are now in an active phase of enrolling patients.

Regarding Russia, you mentioned that the launch has taken place. Can you -- it seems to me that with the recovering economies around the world, that there is increased interest in obtaining products that are approved -- I mean, by local potential partners. Can you give us any sort of a sense if that's true? And if those types of discussions have been increasing? And when we might see the results of those discussions?

Well, we're in a very active phase of discussions with local partners. I think you said it absolutely correctly. There is a substantial amount of activity, because healthcare expenditures and appetite for more expensive treatments has increased a bit in these countries, particularly Russia. And we are currently actively talking to two local partners for the sales and distribution as well as marketing of Oncophage in Russia.

And I guess regarding that -- you mentioned that the launch took place. Can you just give us an update as to what infrastructure is set up in Russia right now that you guys have? I remember, at least in my previous notes, we were talking about a small but nice sized sales force, things along those lines. Do we have those kinds of letters in place right now? Or is it more of a measured sort of launch?

I think just to answer your last question, it is a measured launch, but let me give you a little bit of a background on this. If you remember, prior to product approval in Russia and also active product approval, we engaged in substantial activities in educating the local urology and the oncology communities in Russia.

So the recognition for the product in Russia is at a reasonably high level among the leading urologists and oncologists. Urologists would be the primary target for this product because, just like in other parts of the world, patients get surgically excised, the tumor gets shipped to us, and we make the vaccine and send it back to the oncologists for administration. That pretty much is the majority of the [exploratory] Oncophage in clinical trials and, certainly, it seems to be in Russia in a commercial setting.

We have established a very good educational relationships with some of the top urologists in Moscow and other cities. And the reason our efforts are limited right now in Russia is strictly driven by financial considerations.

We have a limited infrastructure with regard to distribution capability. We have installed freezers in a limited number of centers in Moscow -- these are the lead centers, so patient [talk what] should be reasonable, one challenge being the private pay component. And the interest by physicians is very robust, including the lead urology center in Russia department driven by the chief urologist of Russia.

So, our ability to consummate a distribution relationship on a broader scale and a sales marketing relationship will drive the magnitude of the potential coming from Russia this year, certainly, but in also the next coming years.

Okay. Just switching gears quickly to QS-21, you mentioned that there are 15 clinical trials that are currently evaluating QS-21 in conjunction with a given therapeutic or vaccine. Can you just remind us what are the lead trials that are where we might be able to expect some data in the next 12 to 18 months?

Certainly. I think I will be only divulging public information on this. It has been publicly stated that the trials for malaria, which is the largest trial and the most likely vaccine to get approval in the next several years, contains QS-21. So this is the GSK product. It's been published. And it's one of the candidates to be launched within the timeframe that we have specified.

Shalini, has anything else been disclosed publicly regarding products that contain QS-21 in a Phase 3 setting?

Well, the only non-Phase 3 programs are the malaria, melanoma, and non-small cell lung cancer vaccines.

So, the other two -- I just wanted to confirm it -- non-small cell lung cancer is the largest lung cancer trial to be ever conducted. This trial is currently underway and the data is expected in the next 18 months or so. It's possible that there may be interim data in the meantime; but to be conservative, I think the data will be in the next 18 months.

Okay, great. And I think that's it for me. Thank you very much and good luck.

(Operator Instructions). Derrick Warwick, private investor.

My question is, Antigenics has a great model for how Oncophage works for RCC. Has the Company come up with a model how Oncophage may work in treatment of glioma, since the blood-brain barrier is highly selective at the permeability of different compounds?

Yes, I think that's a very good question. And one of the reasons Dr. Parsa originally was very interested in pursuing the glioma indication is because, unlike large proteins or antibodies that may have difficulty crossing the blood-brain barrier, the kind of immune response we generate, which is a T cell-mediated immune response, and it also works through local cells that are actually involved in the killing process -- natural killing cells. We do not have any issues with regard to the blood-brain barrier issue that we know of.

And the immunological responses that we have seen do confirm that the blood-brain barrier is not an issue in the context of generating immuno response by (inaudible).

Are glial cells at all responsible for cleaning up -- I mean, would you expect that glial cells would be involved in the removal of glioma in some way? And can you assay that directly doing an [ELIJAY] of some sort?

Well, the immunological trials that Andy Parsa held, the immunological assays that Andy Parsa has conducted involves very sophisticated state-of-the-art ELISPOT-driven assays. So my impression is that we have pushed the limits on what can be done with regard to immunological measurements and are using the best and the greatest technologies in his laboratory in his center to measure immuno response.

And my next question focuses on -- we have funding from the NIH or NIC. Is there any possibility to receive more funding from, like, the NSF or to do a Phase 3 trial? And what is the cost of a Phase 3 trial, if the Company would decide to go in that route?

Right. So, there are various pathways for exploring Phase 3 trial funding and they're not limited to the US alone. There are a number of cooperative groups, including cooperative groups in Europe, that may potentially be interested in conducting trials with Oncophage in specific indications.

Now we are in the very, very early stages of these discussions at the moment. And the objective here is to initiate pivotal trials and indications where the readout can be obtained in three to four years. Certainly, the renal cell carcinoma trial that we conducted in the adjuvant patient population, which took as much as 10 years, is practically not repeatable. And I think the regulatory agencies and others acknowledge this fact, that such a trial, which was a beautifully done trial, is not repeatable.

So our emphasis would be to single out indications and patient populations where we can have results in potentially three to four years. And for that, we have two sources of funding. One would be corporate partnerships. And as I said earlier, we've already had several meetings with regard to potential corporate partnerships to fund such trials.

And as you may imagine, Oncophage has generated so much data over the last 10 years to justify further development of this product, both from a product perspective; product challenges have been addressed and in a very substantial way; and from the perspective of demonstrating activity. Even regulatory agency personnel have acknowledged to us that -- in various countries, that they believe the product is active. It may not meet their current guidelines with specific approval practices, but they've acknowledged that, in their opinion, the product is active.

So with that, it paves the path to design -- very cleverly designed trials that could be funded, either through a potential partner or through a cooperative group, as well as what you said, through government funding. So bear with us; we're in very early stages of exploring these activities.

Okay. And then switching to the RCC, I noticed that there's a new Phase 2 trial of the RCC just launched in February. Can you explain what the purpose of that might be or what you guys hope to gather from that?

Sure. The trial that you're talking about is strictly a trial to measure immune response. In the Phase 3 trial that we undertook -- one of the largest trials ever done in RCC patients, which was done in over 120 centers around the world in some 18 countries -- we did not opt to measure immune response. And the reason we didn't is because the kind of immune response measurement that would be meaningful in the context of this product is a very sophisticated ELISPOT assay that, certainly, having 20 centers would not be capable of doing.

And the logistics of shipping enormous volumes of blood for each patient back and forth was so onerous that this was not being practical. So the large trial -- we had done immunology measurements in a number of other trials -- but the large renal cell carcinoma trial did not measure it in response.

In the context of regulatory exploration, or regulatory approval, the objective measure of a biological response was a question that had come up repeatedly. For example, with the Canadian authorities, Canadian authorities informed us that if we have immune response demonstrated in a small trial -- which this is, of about 50 patients -- then we may have a shot at going back to Canada and exploring approval, for example. So this is one example.

And that is the reason why we started this trial, in order to be able to empirically demonstrate, objectively demonstrate -- because nobody can argue with immune response data -- that the product injected to renal cancer patients, who were the candidates treated with our product in our large Phase 3 trial, are capable of showing immune response -- objectively measured immune response after injection with Oncophage.

That is the trial that's ongoing. And it may be important, depending on how things progress with our discussions with regulatory agencies in different venues, in the context of going back to justify approval of the product.

And is there a way to potentially carry on, like, a Phase 4 trial, if we can -- if you can get enough products sold in Russia? Are you allowed to collect specimens from willing volunteers to look at it that way?

Well, we have been informed that if we can collect data from our commercial patients in Russia, that that may have some utility. But all of this is in a gray zone. So I wouldn't want to make any definitive statements. But rest assured that we will do what we can to make sure that the information base to justify Oncophage activity in the eyes of the regulatory agencies is optimized. So, with an eye on costs, we will do all of these activities, but make sure that we obviously contain costs in the process.

And at what point would the Company potentially be facing patent expirations on QS-21?

At what point, I'm sorry?

Oh, yes. At what point would the Company be facing patent expirations on QS-21?

Oh. Well, that question has been addressed, actually. What I can tell you is that most QS-21 patents have expired already. There are some that go on to the 2020 plus timeframe, but most patent applications have expired.

Our royalty payments are independent of patent expiry. So the royalty arrangements we have with GlaxoSmithKline, which has the maturity of the QS-21 portfolio of products, and royalty arrangement with Johnson & Johnson, for example, are independent of that expiry. So we collect royalties for a minimum of 10 years -- in some cases, as long as 15 years after product launch. So if the peer product launched in, let's say, 2012, we will be collecting royalties for a minimum of 10 years beyond 2012. I think this is a fact that may be somewhat misunderstood by the marketplace. That's number one.

Number two, even with potential new QS-21 users, in spite of patent expiry, we still get inquiries regarding QS-21 and we're in some discussions at the moment, because we are the only supplier of QS-21 at the moment and we'd don't know of any other suppliers that have made noise to bring this product out. But very importantly -- very importantly, we control the master file of QS-21 with the FDA.

So, if anybody wants to have access to regulatory information on QS-21, given that this is an excipient, it would be extremely onerous and costly for somebody to repeat the regulatory wealth of information that has been gathered over the last 10 plus years. So we control that master file and therefore, companies still come to us to explore potential additional uses of QS-21.

GlaxoSmithKline and others have done a wonderful job of establishing the importance of this adjuvant. If any of you are interested and do some Internet research, you will -- or scientific research on the Internet -- you will find that there are countless publications that cite QS-21 activity. And pretty much there is really no doubt that a product containing QS-21 does generate the kind of immune response that a product without QS-21 cannot.

My final question is, what -- and I think I might have missed this; I'm sorry -- what is the cash on the balance sheet?

As I said, last year -- Shalini, are you still there? I got a little note that Shalini dropped out. Sorry.

Okay. So let me answer that question. We closed last year with approximately $30 million in cash. Our cash position at the end of March was approximately $24 million, and that includes a number of unusual expenses or front-loaded expenses for the first quarter, which is typical of our Company. We expect to finish the year with a minimum of $15 million worth of cash, minimum of that. And the aim would be to do better than that.

So, as of now we have cash. Our plans are to conserve our cash, at least till the end of 2011.

Hey, thank you very much.

(Operator Instructions). [Joe] (inaudible), private investor.

Good morning, Dr. Garo. I appreciate the time. One quick question. I believe if my memory is correct and, hopefully, research is, there's an undisclosed trial -- I don't even know, or a vaccine trial is -- A, again this is true? And B, is there any updates as to when some results from that undisclosed trial may be available to the public?

I don't know what you mean by an undisclosed trial, because everything has been discussed and filed that we know of.

Okay, I'll leave it at that. I wasn't sure -- I'd read some information and maybe I didn't phrase that quite right, but --

If you're referring to the immunology trial that the previous questioner asked, I just addressed that issue.

Okay. Very good. That's all I got. Thanks for your time.

And at this time, we have no further questions. I'll now turn the call back over to Dr. Armen for closing remarks.

Thank you. I would like to remind listeners that a replay of this call will be available approximately two hours from now through midnight Eastern time on October 29, 2010. Please dial 800-642-1687 from the US or use the international number, which is 706-645-9291. The access code is 69675455. The replay will also be available on our Company website in approximately two hours. If you have additional questions after today's call, you may call us at 1-800-962-AGEN or 2436. Thank you very much.

Ladies and gentlemen, this concludes today's first quarter 2010 earnings conference call. You may now disconnect.