Agenus Inc (AGEN) 2010 Q3 法說會逐字稿

Good morning. My name is Shawn and I'll be your conference operator today. At this time I would like to welcome everyone to the third quarter 2010 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS)

Thank you and Ms. Sharp, you may begin your conference.

Thank you Shawn and good morning everyone. Welcome to Antigenics conference call to discuss the financial results for the quarter ended September 30, 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. We will then have a Q&A session.

But before we continue, I would like to remind you that this conference call will contain forward-looking statements, including without limitation, statements regarding development and commercialization efforts, timelines of the Company and/or its licensees, partnering efforts and their potential impact on the Company's programs, timing of potential royalty streams and the potential efficacy of our product candidates.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Reference 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. These statements speak only as of the date of this call and Antigenics undertakes no obligation to update or revise these statements.

All forward-looking statements are expressly qualified in their entirety by this cautionary statement. 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 payments. As a reminder, this call is being recorded for audio replay.

With that, I will now review our financial results for the quarter ended September 30, 2010.

For the quarter ended September 30, 2010, Antigenics incurred a net loss attributable to common stock holders of $5.9 million or $0.06 per share. This is compared with a net loss of $10.8 million or $0.13 per share for the same period in 2009.

For the nine months ended September 30, 2010, the Company incurred a net loss of $20.1 million or $0.21 per share compared with $32.8 million or $0.43 per share for the comparable period in 2009.

Antigenics recognized revenues in this quarter of $624,000 compared with $896,000 in the same period in 2009. This decrease is primarily due to shipments of QS-21 to our licensees.

Research and development expenses in the third quarter of 2010 were $2.8 million compared with $3.7 million for the comparable period in 2009. G&A expenses in the third quarter were $2.6 million compared with $3.5 million in the third quarter of 2009. These decreases reflect, among other items, our cost containment efforts.

Cash, cash equivalents and short-term investments amounted to $24.4 million as of September 30, 2010. Our net cash burn for Q3 2010 was $4.4 million compared with $5.8 million in 2009. This reduction primarily reflects our cost containment efforts among other items.

This concludes the financial portion of the call. I will now provide a brief corporate update.

Enrollment continues in two phase 2 clinical trials testing Oncophage vaccine in recurrent and newly diagnosed glioma or brain cancer. The trials are being led by Dr. Andrew Parsa of the University of California, San Francisco (UCSF) and are supported by patient advocacy groups as well as National Cancer Institute Special Programs of Research Excellence.

The trial testing the administration of Oncophage in combination with radiation Temodar in newly diagnosed glioma patients is now expanding to include up to nine leading brain tumor research centers in the US based on encouraging early study results.

Data from the first 32 patients in the recurrent glioma trial showed a median survival of 44 weeks compared with a historical median of 26 weeks. All patients tested exhibited a significant generalized immune response and 92% showed an adaptive tumor antigen-specific immune response demonstrated by a significant increase in CD4 positive and CD8 positive T-cell responses.

Antigenics is also working with UCSF to design and execute a phase 1 trial testing Oncophage in pediatric brain tumors.

The area of glioma and other brain cancers represents a very high unmet medical need and is a top priority for the Company.

The company continues to explore development and commercial partnerships for Oncophage on both a global and regional basis in both renal cell carcinoma and glioma. A partnership in glioma could help accelerate and fund a pivotal trial in this indication. A distribution partnership in Russia could assist in broadening commercial penetration of Oncophage as well as potentially assist in seeking government reimbursement while defraying the Company's costs.

A partnership in Europe could also defray costs while advancing potential development, registration and/or named patient programs in that territory.

On a somewhat related note, Antigenics is also pursuing collaborations related to the testing of Oncophage in combination with other therapies that may work synergistically to improve the efficacy of Oncophage in late stage cancers. For example, it may make sense to explore potential combinations with anti-PD-1 antibody, anti-ctla-4 antibody and/or Sutent.

A pursuit of these various types of potential partnerships remains a very high priority for the Company.

Moving on from Oncophage to QS-21, GlaxoSmithKline recently initiated a phase 3 clinical trial testing a vaccine containing Antigenics QS-21 immune adjuvant in the prevention of shingles. There are now four QS-21 containing vaccines currently in phase 3 clinical trials including vaccines for malaria, melanoma and non-small cell lung cancer.

The first products containing QS-21 are expected to be launched in the 2013-2014 time frame. Antigenics is entitled to milestone payments as these programs advance as well as royalties for at least ten years after commercial launch.

The cost of developing and marketing these vaccines is assumed entirely by the Company's licensees. In this way QS-21 represents a very broad and diversified pipeline of programs with minimal risk for investment on the part of Antigenics. This pipeline is rapidly approaching maturity and we look forward to the commercialization of an important next-generation of vaccines.

Finally I will discuss our other internal program, AG-707, our therapeutic vaccine candidate for the treatment of genital herpes. This product is based on the same heat shock protein platform as Oncophage but it is not patient specific like Oncophage. It's comprised of heat shock protein-70 complexed with 32 different immunogenic peptides derived from the HSV-2 genome. HSV-2 is the virus that causes genital herpes.

This high degree of multivalence potentially means that AG-707 will have broader applicability to more patients and may have a durable impact on (inaudible). Recent phase 1 data for this product showed that 100% of the value of patients receiving AG-707 and QS-21 demonstrated a statistically significant CD-4 positive T-cell response to HSV-2 antigens. And a majority of those patients, or 63%, demonstrated a CD-8 positive T-cell response as well.

So we're seeing both of these types of immune responses as a first of its kind achievement in herpes therapy.

AG-707 represents our first proof of concept for the application of the HSP platform in the infectious disease space. In theory, almost any pathogen could be addressed with a similarly derived vaccine. We are currently seeking partners for the further development of AG-707 and/or this platform technology.

We hope that you have found this update to be helpful and I will now conclude my remarks. We are now ready to take any questions.

(OPERATOR INSTRUCTIONS) We will pause for a moment and compile the Q&A roster.

Your first question comes from the line of Ren Benjamin from Rodman. Your line is now open.

Hi, good morning and thanks for taking the questions. So I may have missed this in your prepared remarks, Shalini, but maybe we can just go through it one study at a time. In the newly diagnosed study, you mentioned that it has been expanded to approximately nine clinical sites. Can you give us an update as to how many patients have been enrolled and when do you think we might complete enrollment?

And you mentioned that the additional sites have come on board because of some exciting preliminary data. Can you provide us some color as to what that data is?

Ren, I can give you some of the enrollment figures. So in the recurrent glioma trial we have about 32 patients enrolled currently and 12 enrolled in the newly diagnosed trial which was initiated last year.

And in terms of timing of enrollment on the newly diagnosed trial with the expanded sites, as you mentioned, we would expect enrollment to be complete by the end of 2011.

Okay. What about, any color regarding the additional sites? Like, what's driving them to come on board?

The --

Sorry, go ahead.

Shalini, did you want to take that or?

Go ahead Garo.

Okay, so the excitement that you talk about, Ren, was based on both the results from the earlier trial, which Shalini talked about --

Sure.

-- as well as the fact that in the newly diagnosed patients which are being treated with the standard of care. It is Temodar/radiation in addition to Oncophage. We, in the first eight patients at home we have data so far. We are about a year into that trial and none of the patients that have been evaluated have either recurrences or have died. And the caveat, this is a single arm trial. The investigators involved think it's highly unusual for having no recurrences not at a year into the trial and that's one of the reasons they and their colleagues and other institutions who have been privy to this data are excited enough to say let's enroll more patients and see if these results hold up.

If they do, the meaning of the interpretation of the results would be much more meaningful.

Okay, okay. Just jumping back to the recurrent study, I got the enrollment update. Maybe I missed it. When do we think enrollment will complete and will we see some additional maybe updated survival data at -- this year for this study?

I think both studies will continue to update as appropriate and these results will be presented either in published form or in upcoming conferences.

Okay but there's no plan of let's say the Society of -- I think it's Neurological Oncology, the cell conference that's coming up. Are there any plans for a presentation there?

This is obviously an investigator sponsored trial and we shouldn't preempt what they will be doing, so anything that's upcoming will be announced by them first.

Okay, okay. Can we talk a little bit about the phase 3 plans? Is this something that is in discussions already? Is it something that you're going to, along with the investigators, kind of wait to see how the phase 2 results pan out and so will most likely be a 2012 sort of an event? And can you also talk to us a little bit about if there is any, and if there is what sort of color is there regarding any partnership discussions?

Sure. So let me take the plans for phase 3 first. Plans for phase 3 are contingent on certainly funding from (inaudible) sources and that could be partnerships as well as other means of financing such a trial. But suffice it to say that there's a lot of excitement about moving this program forward. There's excitement not just at Antigenics but particularly by investigators who have been taking the lead on these programs so far.

So it's very important that we accelerate the enrollment in the existing trial, which we just announced this week, as you know, and get as much additional data as possible. The intent would be to initiate the phase 3 trial in the newly diagnosed patients because we believe that that's the best setting to see efficacy for Oncophage, even though we've had the data suggestion from the earlier trial that show survival has been extended in the single arm trial. We think we have a much better shot of showing more profound impact with vaccination of patients who have been newly diagnosed.

So it's reasonable to expect that phase 3 trials will be in those patients and the more data we gather from our existing or the ongoing trial, the better off we are in terms of deliberately designing a trial that will likely result in success.

So we do not have, as a Company, the means right now to engage in a full blown phase 3 trial from a monetary perspective and that's why we have done what we have within our means, which is acceleration of the existing trial so that we can add much more value before we start the phase 3 program.

But ongoing discussions continue with potential partners to see how we can bring additional resources to put behind this program because there is a lot of merit in continuing it. Even partnership discussions that we've had with glioma experts, partners themselves have been struck by the results so far.

Okay. I guess just switching gears real quickly to Oncophage in Russia, can you give us any sort of an update as to what's happening there?

Yes. I think Shalini briefly alluded to what our plans are. We are working with a European company that has a significant presence in Russia. We're beyond the term (inaudible) and we hope to be able to initiate a full blown commercial sales program in Russia very shortly.

And any sort of clarity regarding the reimbursement landscape or picture in Russia? Has there been any --?

Because of the experience of this company and their ongoing operations in Russia, this will fall into their laps so the arrangement that we're exploring with them is that we supply Oncophage to them, manufacture the product and we supply it to them and then they take over the process from the importation of the product and to sales and reimbursement.

So it's reasonable to expect that this will be rolled in out in two phases. One will be based on private pay. They believe there's a market with private pay in Russia. Not a huge market, but there's a market. There is demand for it. Followed by their exploration of government reimbursement, so the first phase will take six to nine months followed by potential -- the potential of government reimbursement.

Okay. And then just continuing on that track, Oncophage in the EU or Oncophage, the regulatory developments for Oncophage in let's just call it the rest of the world --

Okay.

Can you give us an update?

Sure. Let me take EU first. As you know, after the European agency gave us the negative vote last year, right around this time, we regrouped. We had a number of sessions with regulatory experts as well as members of rhe EMEA as we also had discussions with potential collaborators or partners in Europe. And once again, we don't have the full resources to be able to do this on our own in Europe. That is to pursue the registration of Oncophage in renal cell carcinoma in the adjuvant setting because that's where most of the data exists and very valuable data.

So we're in the process of now finalizing an arrangement with a European partner who will take the lead for the registration of this program and once again we will transfer product to them and they will pursue both registration as well as commercialization.

So stay tuned. I think -- we hope, we hope that by the time we have our update call for the year-end results we will have some of these more definitive arrangements that we can announce for you.

Okay. And when we're talking about the arrangements, can you give us a sense as to how we should be thinking about it? Would it be a characteristic sort of large up front sort of deal here or is it something more where you're focusing more on the back end royalties? Can you help guide us as to how we should be thinking about it?

Certainly. I think our foremost priority here is to make sure that Oncophage gets to patients and that's very important. We want to do this in the most efficient way possible because our belief and the belief of a number of experts in the field as well as treating physicians that there is a terrific need for treating patients in the adjuvant setting because a reasonably large proportion of them relapse and when they relapse, as you know, in spite of the newly available drugs, there's really no cure for these patients.

Once you relapse with renal cell carcinoma, it's basically a sentence to death so by preventing relapse, we would be adding significant value to patients, their families and their ability to have a high quality life going forward.

So that's one of the reasons our priority is to expeditiously take this program forward and not hold the program back because of any requirements for upfront payments or what have you so any arrangements that we will do will be designed to have a partner underwrite the cost of taking the program forward, which is very important for us, and the partner's ability to successfully get to the final line.

And as you may know, a lot of the larger pharmaceutical companies don't really have an interest in specialized markets and so we're talking about a medium to small size company that has the ability and has the interest and are eager to take the program forward. And as such, their ability to make huge upfront payments will not be the kind of deal that we're looking for.

So as long as they can underwrite it and bring a diligent effort to take the program forward, that will be an important requirement for us. We will cover some of the internal costs by doing such an arrangement. There will be some modest upfront payment but the key to us is going to be to have either a royalty or a transfer price arrangement.

Okay.

So one of those two possibilities.

Got it. Switching gears to AG-707, will we be seeing the publication of this data that you already presented any time soon or is that more of a 2011 event?

I believe it's a -- in terms of publication submission it will happen this year and the publication is basically ready to go. But in terms of the actual publication coming out, it's likely to be 2011.

And just kind of the excitement, there was a lot of excitement when the data came out, can you give us a sense of the -- are partnerships discussions heating up around 707 or are you kind of holding back on that until you can move that forward a little bit further on your own?

We're having some discussions, okay? We're having some discussions. A few companies have signed CDAs so with that we're continuing to have discussions. We cannot have discussions with anybody who doesn't sign a CDA because the publication is highly confidential until it gets published so there are several leads that we're pursuing and once again, a partnership deal is likely to take place next year, not this year.

Got it. And then just a final couple of questions on QS-21, is there a projected milestone payment expected from any of the licensees this year and are there any -- I mean has there been an update from any of the licensees as to when we might see some data from any of the programs or any sort of an update regarding that?

And then I guess do you know of any products from some of your earlier staged licensees that may be advancing into more advanced studies like a phase 3 pivotal study?

Shalini, why don't you tackle that question.

Sorry, Ren, could you repeat the latter part of the question?

So I guess one, do we project any other milestone payments from the current licensees either this year or next?

Sorry, I wasn't sure if you were asking about this year or next. I think for this year we're not anticipating any additional milestone payments. We have one payment that is a regular payment from GSK related to the transfer of the manufacturing technology that we did a few years back that we get one payment every two years until 2012. So we do have that one coming up at the end of the year but it's recognized on a straight line basis so you won't see any kind of flip in the financials. Other than that we don't anticipate any milestones for 2010.

Okay.

2011 it's a little bit harder to predict because obviously the time frames are under the control of our partners.

Got it. And then just based on your earlier stage partners, do you know of any that might be entering phase 3 trials in the near term?

There are one or two that we think may enter phase 3 but we are -- I don't think it's -- I think it would be premature to comment on them specifically at this point.

Okay. Great. Thank you guys very much and good luck.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of [Jeff Lighter], a private investor. Your line is now open.

Hi, thank you for taking my call. I just had one question and it was about the QS-21 payments in 2013 and '014. I understand the burn rate and cutting the spending, which of course is necessary and a wise business move. It seems like we have pretty good news out there right now and the results are good. Can we stay in business until we start getting large payments in 2013 and '014?

That's a very important question and a question that applies to us and has applied to us for the last 16 years of our existence. So can we stay in business? Of course staying in business is a function of how much cash we have at the moment, how much cash we can raise from different sources including monies coming in from partnerships and as well as milestone payments and so on, and our ability to operate with cost containment so that we only spend monies on programs that will continue to add value to the Company.

So we have, as you saw in our report, we have approximately $24 million plus in cash. We have additional cash coming in, modest amounts of cash coming in over the next month and year and we have a burn rate target which is somewhere around $15 million to $17 million, so we don't have to worry about your question in the very near term but it's an ongoing preoccupation for us to make sure that we have the appropriate financial resources to not only stay in business but also prosper.

So we don't really think about it in the context of are we in a desperate shape. We're not but the goal is to be able to use the monies effectively so that we can add a lot more value and grow the Company.

Excellent. Thank you very much.

Your next question comes from the line of [Eric Warrick], a private investor. Your line is now open.

Hi, my call is very similar to the last question. On our last conference call, you said that there would be some challenges the Company would be facing in the next year or so. What are some of those challenges and have you met the financial needs to meet those challenges?

Are you talking about financial challenges?

Yes, financial challenges.

Financial challenges are several-fold for us. One is, as we mentioned, making sure that we have enough resources to operate and grow the business, very important consideration. And secondly that we meet some of the upcoming obligations while not in the next six months are in the next year to 18 months and that's where we are working with the parties that hold certain notes and certain other paper to make sure that we can restructure those. Those are very important considerations for us.

In the meantime, we have continued to make sure we replenish some of our cash position so that we're not very vulnerable but my goal is that over the next months some of these issues will be addressed as well.

Okay, and then my next question is on the glioma study. The data does look rather promising. I know it's early on. But statistically, what difference does the Company need to see between the standardized treatment and the standardized treatment with Oncophage to apply for regulatory approval in the US?

That's a very difficult question to answer, very difficult question because a lot of that is a function of the results. And when I say results, for example if you take the first line patients, patients who are newly diagnosed, these patients basically will die within 12 to 18 months after treatment so there may be a tail to it but this is a dreadful disease and there's no cure for it.

So if we can, for example, show that eight patients where we have observed no recurrences and no deaths yet, if that goes over a longer period of time, we need to take that into consideration for a regulatory approval strategy. Certainly if you, in the unlikely event that you enroll 20-30 more patients in the trial and you have a very low percentage of recurrences or no recurrences, that will definitely be an important point to consider on how you move towards a regulatory approval strategy.

So it's still a little bit premature because when you're talking about a handful of patients, you really can't put percentages on them because it's not meaningful to have a percentage on 8 or 10 patients but it is meaningful to see no recurrences or no deaths over a period of time, even in a small patient population.

So those are the things that we are watching for and that's one of the reasons we're very eager to enroll quickly in the newly diagnosed patient population, to see if there is something very profound going on. And if there is, certainly that would mark a very quick potential registration for a disease for which there's really no effective treatment or cure today.

Okay, and my next question lies with QS-21. As I understand, I might be wrong on this, but we have a lot of hopes right now on GlaxoSmithKline in getting the malaria vaccine approved. Are they also using the standard regimen which is the aluminum hydroxide at the same exact time when comparing QS-21 in the malaria vaccine?

Okay, so let me turn the clock back and just give you a flavor of what has gone on in terms of advancements in the field of vaccines. These include both prophylactic vaccines, which are the traditional vaccines used for disease prevention, and malaria is in that category, as well as therapeutic vaccines, which are vaccines or vaccine products used for treating an existing disease, treating a disease that a patient has contracted such as cancer, certain infections and so on.

As you mentioned, alum, alum is the only product that's been around for a long time and it's oral approved as an adjuvant. But alum is very limited. While it has worked well in traditional vaccines in the development of modern vaccines, which are going to be the driver -- driving force for many of the companies and GlaxoSmithKline is a leader in the field, no question about it, new vaccine formulations have become critical.

Glaxo caught on to this need over a dozen years ago and identified adjuvants, not just one adjuvant, but adjuvants that are critical in the makeup for adjuvant mixers or adjuvant formulations.

QS-21 is a critical component of their modern vaccines and just as a reminder, as you may know there are approximately 14 separate vaccines in clinical development, phase 1, phase 2 and phase 3 clinical development that contain QS-21 at GlaxoSmithKline.

A number of these products have been publicized and talked about. We are not -- we don't have the freedom to preempt GlaxoSmithKline and talk about the others that they haven't talked about but we have the ability to say there are approximately 14 products, most of which reside at GlaxoSmithKline that contain QS-21.

In these trials they do not compare in the registration trial. Certainly they don't compare a new formulation to a vaccine formulation with alum. And the reason for that is because in all the previous work done it has been shown that vaccine formulations that contain QS-21 and other adjuvants that are proprietary to GlaxoSmithKline are far superior in terms of immune response to any formulation with alum so there is really no requirement to show a new formulation with an old formulation. The requirement is you show the efficacy of your drug versus a placebo arm or versus a standard arm.

So that's the landscape with QS-21 containing vaccines and modern vaccines under development.

But is there any risks then in 2013 if they would get approval of their malaria vaccine that they could back out and not use QS-21 as the adjuvant?

I will tell you humbly there is zero risk.

Okay. And my next question, again I asked the question last time and I just didn't have enough time to respond, it pertains to, again, the EMEA asking for a better measure of quantitating the active peptides on Oncophage. Has the Company dealt with (inaudible) that you can verify that Oncophage does indeed work?

Okay, so let me answer that in two components. One is the first question you ask and you made a very astute comment that there was a need to quantitate the peptides or that was one of the questions from the EMEA in terms of our product factorization issues.

Now given the fact that we don't know exactly which peptides are in which patient formulation or which antigens, given the fact that not everything is knowable, because hence the reason for individualization of this product, every patient's mutated antigen or peptide in their cancer is different. And so there are certain limitations on what you can and cannot do.

Having said that, we are highly confident that the progress we've made in terms of addressing the specific issues that have been raised at the EMEA meeting before, during the process that we went through last year, we are highly confident that the majority, a significant majority, if not all, have been addressed by the Company subsequently.

Okay, so if we were to go back in some form for reconsideration, we are very confident that the product issues will be put to rest. Okay, so that is the second question of demonstrating efficacy.

Now given the structure of this trial and given the length of time it took, given the fact that patient definition changed midstream during the course of the trial, that is not an issue that we prompted, meaning we did not change the patient definition but the standard definition out there by the experts changed independently of us, given all those considerations, we tried to make a case, a compelling case, that the analysis we conducted which suggested that a clearly defined earlier patient population showed a profound benefit, that should be used as a valid argument.

Now no one, by the way, will argue the fact that with a cancer vaccine, seeing an effect in earlier stage patients, clearly defined, earlier stage patients is not expected. That is highly expected, so the question is how do we overcome the convention which is you have to predefine your patient population and go with it.

So subsequently, as you know, we had an issue prior to that. We initiated an analogy trial to show that when you inject Oncophage to renal cell carcinoma patients you can measure changes with regard to immune parameters that will be an added demonstration of the fact that Oncophage does something and does not just something but does what it's supposed to do in terms of activating the immune system, both prior to administration and after administration.

So with our collaborator partner that we hope to finalize our arrangement with, which is a local player in Europe, we hope to be able to open up discussions again to see how we can pursue a resubmission of our existing as well as new data.

And my final question, thank you. My final question is will the statistics be released any time soon on the survival registry? I guess it's closed now but the final statistical analysis, will that be released any time soon?

I think that's again a 2011 occurrence and we hope that it will come out in the form of a formal either publication or a presentation.

Okay, all right, thank you very much.

There are no further questions at this time. I'll turn the call back over to the presenters.

Thank you, Shawn. 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 March 28, 2011. Please dial 1-800-642-1687 from the US or use the International number, 706-645-9291. The access code is 18732304. The replay will also be available on our Company website in approximately two hours.

This concludes today's conference call. You may now disconnect.