Agenus Inc (AGEN) 2010 Q4 法說會逐字稿

Ladies and gentlemen, this is the conference operator. Good morning my name is Tracy, and I will be your conference operator today. At this time I would like to welcome everyone to the fourth quarter and year end 2010 earnings conference call. (Operator Instructions). Thank you. I would now like to introduce and turn the call over to Garo Armen, Chairman and CEO of Agenus. You may begin your conference.

Thank you, and a very good morning everyone. Welcome to Agenus' conference call to discuss the financial results for the quarter and year ended December 31, 2010. With me today is Shalini Sharp, Vice President and CFO. Normally Shalini does the financial part of the call, but she has partially lost her voice, so I will chip in today, but she will be available for questions.

We have -- 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 our financial results as well as provide a corporate update. We will then open it up to question and answers, but before we continue, I would like to remind you that this conference call will contain certain forward-looking statements, including without limitation, statements regarding the Company's cash position, timing of potential income streams and development and commercialization efforts, time lines, availability of data, and potential efficacy with respect to products and product candidates 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. 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 Securities & Exchange Commission. These statements speak only as of the date of this call, and Agenus undertakes no obligation to update or revise the statements. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. When evaluating Agenus 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 the 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 and year ended December 31, 2010. For the quarter ended December 31, 2010, Agenus incurred a net loss attributable to common stockholders of $2.6 million or $0.03 per share. This compares with net income of $1.7 million, or $0.02 per share for the same period in 2009. For the year ended December 31, 2010, the Company incurred a net loss of $22.7 million, or $0.23 per share, compared with a $31.1 million or $0.39 per share for the comparable period in 2009.

Agenus recognized revenues for the year ended December 31, 2010, of approximately $3.4 million, compared with approximately $3.3 million during the same period in 2009.

Research and development expenses for the year ended 2010 were approximately $12.9 million, compared with approximately $17 million for the comparable period in 2009. General and administrative expenses for the full year, 2010 were approximately $12.1 million, compared with approximately $14.1 million for the full year 2009. These decreases reflect, among other items, our cost containment efforts.

Cash, cash equivalents and short-term investments were approximately $19.8 million, as of December 31, 2010. The Company's net cash burn for the years ended December 31, 2010, and 2009 were approximately $15.7 million, and $25.2 million respectively.

The 2010 results primarily reflect the Company's continuing support of the Oncophage -- or the old Oncophage series, now the Prophage series of cancer vaccines as well as its cost containment efforts. Net cash burn for 2011 is projected to be in the range of $16 million to $18 million.

I would like to highlight that we have retired all but the last $100,000 of our $50 million, 5.25% convertible subordinatednote which was incurred in 2005. The last of this transaction was consummated during the fourth quarter of 2010, when we exchanged approximately 8.9 million shares of common stock, and $6.4 million in cash, for approximately $17,595,000 of the notes outstanding.

Finally, would like to mention that during the fourth quarter of 2010, we were awarded approximately $424,000 worth of grants under the IRS's qualifying therapeutic discovery project. Under the program, projects were selected by the Treasury Department and the Department of Health and Human Services, and in order to qualify, projects had to incur preclinical and clinical research costs during 2009, and 2010, and be designed to result in one or more new therapies to treat or prevent a disease or condition representing an unmet medical need, in addition, reduce long-term healthcare costs in the US, and demonstrate the potential to enhance competitiveness, and create high-quality jobs in the US.

This concludes the financial portion of the call, and I will now provide a brief corporate update. As you are aware, we're excited to announce the change of our Company name this quarter from Antigenics to Agenus. The new name reflects the broadening of our product portfolio, and clinical candidates beyond autologous antigen based vaccines, as well as our commitment to actively pursuing licensing opportunities to leverage our development capabilities and expand our product portfolio.

We are extremely proud of the pioneering work that we have done in the field of antigen based personalized cancer vaccines over the past 16 years, and our commitment to this technology continues to be an integral part of our Company. In conjunction with this, our personalized cancer vaccines have been named the Prophage series of cancer vaccines. The name Oncophage will be retained in the adjuvant renal cell carcinoma indication as part of the Prophage series. Our herpes therapeutic vaccine name also has been changed from AG-707 to HerpVto properly and more accurately reflect the indication and the fact that it is a vaccine.

Beginning with the Prophage series of vaccines, firstly the enrollment is ongoing in two Phase II clinical trials testing the Prophage series vaccine, G-100, in newly diagnosed gliomas, and G-200 in recurrent glioma. The trials are being lead by Dr. Andrew Parsa of the University of California San Francisco, and are supported with funding from the American Brain Tumor Association, the Accelerated Brain Cancer Cure, the National Brain Tumor Society, and the National Cancer Institute. Data from the first 32 patients in the G-200 recurrent glioma trial showed median survival of 44 weeks compared with a historical median of 26 weeks. And very objectively in this trial, all patients tested exhibited a significant generalized innate immune response, and 92% of the patients showed an adaptive tumor antigen specific response, demonstrated by significant increase in both CD-4 and CD-8 T-cell counts. Updated data from this trial is expected to be reported by midyear this year.

A second glioma trial in newly diagnosed patients involves administration of G-100 in combination with radiation and Temodar, which is the standard of care. Based on encouraging results, this trial has been expanded to include up to ten leading brain tumor research centers in the US.

In addition, Agenus, in conjunction with UCSF, plans to initiate a Phase I trial in the Prophage series vaccine NP-150 in pediatric neurological tumors. There are very few available treatment options for this disease, and the area of glioma and other brain cancers represent a top priority for our Company.

We continue to explore development and commercial partnerships for our Oncophage vaccine for RCC, renal cell carcinoma, and Prophage G Series for glioma on both a global and regional basis. A partnership in glioma could help accelerate and fund pivotal trials in this indication, which would be among the next steps for us. A distribution partnership in Russia could help broaden commercial penetration of Oncophage as well as assist in seeking government reimbursement at minimal cost to the Company. A partnership in Europe is expected to minimize cost of advancing development, potential resubmission and registration in that territory.

As previously mentioned, we are pursuing collaborations to test the Prophage series of vaccine candidates in combination with other investigational and/or commercially available therapies in an attempt to enhance the efficacy of our vaccines in late-stage cancers. I am pleased to report that during the first quarter of 2011, we entered into a research agreement with Memorial Sloan-Kettering Cancer Institute. The collaboration will test the Prophage series of vaccines in combination with therapeutics that prevent down regulation of the immune system, such as antibodies to CTLA4 and PD1. This group of antibodies represents a new class of immunotherapeutic agents that represent complementary mechanisms of action for use with cancer vaccines. Pursuit of these various types of potential partnerships remains a very high priority for our Company.

Now, moving on to QS-21. GalaxoSmithKline is currently testing more than a dozen vaccine candidates containing our QS-21 Stimulon Adjuvant. I would like to highlight that four of these programs are in Phase III clinical development. The Phase III programs include vaccines for shingles, malaria, melanoma, and non-small-cell lung cancer.

This February will be a major milestone for the melanoma trial. This trial enrolled approximately 16,000 subjects, and the last subject is expected to be dosed during this month. The malaria study has been featured in several publications over the last few months, they include the Lancet, Infectious Diseases, Scientific American, and Reuters Special Report on Malaria. This vaccine candidate has the potential to be the first vaccine against a human parasite, and has the potential to be a product given alongside standard infant vaccines in a substantial part of the world.

Pending favorable data, the first vaccine products containing QS-21 are expected to be launched in the 2013 to 2014 time frame. Phase III data should become available during 2012.

Agenus is entitled to receive milestone payments as these programs advance, as well as royalties for at least ten years after commercial launch. In addition, Janssen AI, a division of J&J, has a vaccine candidate in Phase II trial to treat Alzheimer's disease.

The cost of developing and marketing all of these vaccines is assumed by our licensees. QS-21 represents a very broad and diversified pipeline of programs with minimal risk and no real investment on the part of Agenus. This pipeline is rapidly approaching maturity, and we look forward to the potential commercialization of an important next generation of vaccines.

Finally, I will discuss our program and the treatment of genital herpes, HerpV, formerly AG-707. This product candidate is based on the heat shock protein platform, which is the engine of our Prophage series of vaccine candidates. But this one is not patient specific, because it does not need to be. It is comprised of heat shock protein 70 complexed with 32 different immunogenic peptides derived from the HSV2 genome. HSV2 is the virus that causes genital herpes. This high degree of multi-valance potentially means that HerpV will have broader applicability to more patients and may have a more durable impact on the disease.

Phase I data for this product showed that 100% of the evaluble patients receiving HerpV with QS-21 demonstrated a statistically significant CD-4 positive T-cell response to HSV2 antigens. In additions, a majority of these patients, 63%, demonstrated also a CD-8 positive T-cell response. Eliciting both of these types of immune responses is a first of a kind achievement in herpes therapy. A report of these findings will be submitted for publication in a peer review journal by the middle of this year. HerpV represents our first proof of concept study for the application of HSV platform in the infectious diseases field. Based on the potential of our platform, almost any pathogen could be addressed with similar vaccine constructs. We're currently seeking partners for the further development of HerpV, and/or this platform technology.

I hope that you found this update to be helpful, and I will now conclude my remarks, and I believe we're ready for a Q&A session.

(Operator Instructions). Your first question comes from the line of Ren Benjamin from Rodman. Your line is open.

Hi, good morning, and congrats on the progress. Can we talk a little bit -- we have several questions, maybe just starting off with Oncophage. Can you talk or give us an update as to what is happening in the Russian front as far as securing a local distribution partner? Is there interest? Is there talks going on? Or is it -- or are you spearheading it yourself at the government level?

Certainly, Ren. Let me just give you a little bit of a background of what is happening in Russia in general, and then I'll put it in the context of what is happening with us. In the Russian marketplace, over the last two years, specifically, there have been some remarkable reforms in the business environment of Russia. As you know, many of the multinationals have really stepped up their efforts, particularly in the pharmaceutical business to expand their operations in Russia. So in that regard, over the last two years, Russia has become a dramatically better business environment. Unfortunately our approval was a little over two years ago, so at the time we got approval we were still struggling with some of the requirements for reform and some of the import/exportation issues, so on and so forth.

All of these logistical issues are basically behind us now. And the proper permitting has been done. Some test runs have been done -- run, and what we're in the process of doing is -- we have talked about this in previous calls -- finalizing the arrangements with at least one partner, but in the meantime, Oncophage has gotten attention from several other local parties in Russia.

Russia has a number of high-tech initiatives, and a few of these initiatives are in the biotechnology field, and a substantial amount of money has been devoted to upgrade systems in Russia to really lead in a few areas. An outfit called [Skofcova] as well as Rusnano, are among the government established institutions who have started pioneering in this effort. And we have unsolicitedly gotten several inquiries by established pharmaceutical distributors and players in Russia in just the past month alone by inquiring about the fact that some of these government initiatives are very early-stage programs, and we represent an already-approved product, which represents a high technology and would we be considering partnering with local players -- entirely Russian-owned players, in order to bring this product to the market. So I hate to put it this way, but bear with us a little bit longer, and I believe that we have a reasonably good chance of finalizing a deal and exploring the commercial marketplace in Russia in a way that will not tax our own financial resources and be completely undertaken by a third-party.

Okay. And then just switching gears, still staying with Oncophage but to the EU market, can you -- you may have mentioned this in your prepared remarks, but maybe I missed it. Just what is the status there? If there is anything moving forward in the EU market?

Certainly. As you know, after we withdrew the application, we had several meetings with specific country regulatory agencies within the EMA who are much more advanced in the field of immunology, and in their consideration for cancer vaccines. And we were encouraged, in no uncertain terms, encouraged to basically fill in some of the empty boxes, and consider coming back for a reconsideration of our application and one of the drivers of this is our immunology trial, which has started and continues to enroll patients, and we're in the process of exploring a local player in Europe. We're in very advanced discussions with this local player in Europe, who will undertake the significant amount of the cost of this, completing the immunology trial in renal cell carcinoma, and undertake also additional costs that will be required for the regulatory work in the EU, and potential resubmission of our application. So that too is in very advanced stages of discussion, and I hope that we will have something during the course of this quarter.

Okay. And now switching gears to -- and I'll probably make a mistake on the nomenclature here so just correct me if I'm wrong. So Prophage G-200, which is the vaccine for the recurrent brain cancer, brain tumors, we're expecting data -- updated survival data from that trial in the middle of this year, potentially at ASCO?

The answer is yes. Potentially at ASCO.

Okay. And about how many patients -- can you just give us a trial update as to -- is it just a longer-term follow-up, and the trial is done, and it's a longer-term follow up, or has there been any additional dosing? Can you just give us a status update.

Sure. In the recurrent glioma setting, 34 patients have been enrolled, and as we had previously mentioned, we're now working towards closing enrollment at UCSF even though there has been additional demand for enrolling more patients, we need to put a closure to this trial, so that we can contemplate what the next steps will be. So at UCSF, we're working on closing the enrollment. Enrollment has been closed at all of the other centers, which include Columbia and Case Western. And the data that I provided to you in terms of survival and recurrence in this setting, versus the standard of -- versus the historical controls, is from this trial, and the immunology data that we talked about also is from this trial. In the newly diagnosed setting, we have now enrolled 17 patients, and are actively working to initiate the other centers that we talked about to include the rest of the patients. As you may remember, we had only eight patients enrolled in this trial, and because of the encouraging trends, we decided to add more centers and also have as many as 50 patients enrolled in the trial. So since the last update, we have gone from eight to 17 patients at just one center, and we expect that as the other centers come-on board, the enrollment will be significantly improved by the next quarter, and certainly by the fall of this year.

So is it fair to say that we can maybe obtain some preliminary results from this trial in the second half of 2011 or maybe earlier?

I think preliminary results, yes.

In the second half?

In the second half to be conservative.

Okay. And so did I get the nomenclature correct? That the newly diagnosed is Prophage G-100?

That's correct. So the way we have worked the nomenclature, the old Oncophage, which encompassed everything, has now been named as the Prophage series. And the name Oncophage has been retained for the RCC adjuvant setting only. So Oncophage now is part of the Prophage series, but only refers to our product in the RCC setting. In the Adjuvant RCC setting.

Right.

The rest of them, the nomenclature is somewhat self-descriptive -- or we try to make it self-descriptive -- so G refers to glioma, and Prophage G-100 is the newly diagnosed patients. Whereas Prophage G-200 would be the recurrent patient population. The next one I wanted to talk about in terms of update is Prophage NP-150, and that is because, just to get use to the algorithm, NP will refer to neurological pediatric tumors, and 150 is because there may be some recurrent and some newly diagnosed in that mix. Okay?

Okay. And what is the status of that? We have it as something to initiate this year.

We have been working with UCSF investigators to finalize the protocol, and that we're basically targeting to initiate this trial in the second quarter of 2011.

Right. And then you mentioned the combination studies in your prepared remarks, or at least preclinical combination studies. Can you give us some sort of thoughts as to when you think these combination studies may enter the clinical stage?

Okay. So it is -- the combination studies are really in two or maybe even three categories. One are the kinds of combinations that we are looking at, at memorial Sloan-Kettering Research Center, which includes CTLA-4 antibody, and as a soon as ipilimumab becomes, for example, a commercial product -- a commercially available product, or even perhaps before that in some circumstances, we will be looking at potential combinations of a Prophage series product with ipilimumab. In addition, there are other products in the pipeline that we're in the process of exploring. One of them is the PD-1 antibody. It is perhaps best described as the next generation ipilimumab, and the moment we have that product available to us, because it's not commercially available, so it will require us finalizing a potential arrangement with a provider of that product, then we will contemplate what to do with that next.

So all of these things are in active exploratory stage. In addition to that, there are other products that we are looking at, and one of the reasons these are being explored actively is because we want to generate both some preclinical data so that going in to the clinic in combinations, we have a better justification in terms of the synergistic outcomes that we can expect with Prophage series plus one of these compounds. In the last 12 months, there has been a considerable amount of progress made in looking at the immunological effects of some existing products such as Sutent. And even temazolomide, which is the combination we're using in our glioma newly-diagnosed patients. And as we understand what they do to the immunology system, we'll be able to design and act on the protocols much more deliberately. And presumably with lesser risk of outcome. So those are being explored, and we hope to undertake some of these activities during the course of the next months to this year.

Okay. Switching gears to HerpV. At least inmy previous notes we have that there was the potential to publish the Phase I data. Has that manuscript been accepted anywhere? Has it been written? And the also can you just comment on how discussions with potential partners have been going, or if it is something that will be initiated this year?

Okay. So, as far as the manuscript is concerned, the manuscript is essentially final. It's been finalized by the respective authors. There will be two manuscripts, actually, and the authors include some of the leading investigators from the leading centers of the world. And it's just making its rounds now for a final review, and it will be submitted hopefully very shortly.

Okay.

As far as partnership discussions on this, we have thought that once the manuscripts have been submitted we have a better basis for having intelligent discussions with partners, so I'm hoping that those discussions will be underway also during the course of next months to this year.

Okay. And then just one final question regarding QS-21. Should we be expecting any milestone payments this year in 2011? Is there any milestone payments attached with let's say a completion of enrollment, or it is all regulatory filings in the sales (inaudible).

It depends on the product, Ren. For example, with certain products upon entry into Phase III, we get a milestone payment. With other Companies and other products we get a milestone payment upon regulatory filing.

Okay. And I guess just one cash question. I believe -- if you can just reiterate for me, please, the burn that is expected -- the net cash burn expected for this year, and then I just want to make sure that all of the debt that is meant to be retired has -- or all of the debt that you had has now been officially retired?

Okay. So we are had two series of debts. One has been the public debt, that's the $50 million convert. It has essentially all been retired. The reason I say essentially all is because the last $100,000 worth of it, we haven't found the owner. And so there's no claim for it so far. But it's immaterial, basically.

Okay.

So for all intents and purposes, that $50 million public debt is done. And just to give you an idea of what we have done with it, we have retired the $50 million for approximately less than $10 million of cash consideration, and approximately $15 million of stock consideration. Okay? Approximately. And so between cash and stock, it has been retired at current stock levels for slightly less than $0.50 on the dollar. And that was because we made some early market purchases, direct market purchases and some negotiated purchases with the holders. So it has been done except the last $100,000 for which we cannot find a claimant. The second piece of that debt was a transaction consummated with one party that spread it in different instruments within their Company. And that was a $25 million convertible debt that comes due this August, the end of this August, and we have not yet done anything with it, but we hope -- we expect, actually very, very, very shortly to restructure that debt.

Excellent. Thank you very much. And congratulations on the progress.

Thank you.

(Operator Instructions). And your next question comes from the line of [Schlomo Freeman], who is an individual investor. Your line is open.

Thank you. Two questions, one, based upon what you said this morning, I assume you have enough funding to last you through at least 2011?

Yes.

Okay. And also based upon the fact you are listed on NASDAQ, is there any thought or consideration at the present time of any reverse stock splits?

As you may know, we have had that option in place, but we haven't acted on it, and we probably don't want -- unless there is a compelling reason to do so. But we have had the option in place.

Okay. Thank you very much.

At this time, there are no further questions in the queue. Turn the call back over to the presenter.

Thank you very much, and 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 August 17, 2011. Please dial 800-642-1687 from the U.S. or use the international number, which is 706-645-9291. The access code is 42659717. The replay will also be available on our Company website in approximately two hours. If you have any additional questions after today's call, you may call us at 1-800-962-AGEN, extension 2436. I hope you all have a very good day.

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