Agenus Inc (AGEN) 2011 Q4 法說會逐字稿

Good morning. My name is Melissa and I will be your conference Operator today. At this time I would like to welcome everyone to the Agenus fourth quarter and year-end 2011 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) Thank you.

Ms. Jonae Barnes, Vice President of Investor Relations and Communications you may begin your conference.

Great. Thank you, Melissa, and good morning, everyone. Welcome to Agenus' conference call to discuss the financial results for the fourth quarter and 12 months ending 2011. With me today is Garo Armen, Chairman and CEO, and Shalini Sharp, CFO. During this call we will review our financial results as well as provide a corporate update. We will then open up the call for a Q&A session.

But before we continue, I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the Company's cash position, timing of potential income streams and developments and commercialization efforts, time lines, availability of data, and potential efficacy with respect to products and product candidates of the Company and its 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 releases. They are disclosed in more detail in our most recent filings with the US Securities and Exchange Commission. These statements speak only as of the date of this call. Agenus undertakes no obligation to update or revise the statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. While evaluating Agenus' business and securities, investors should give a careful consideration to these risks and uncertainties.

As a reminder this call is being recorded for audio replay. With that, I will now turn the call over to Shalini to review our financial results for the fourth quarter and year ended 2011.

Thank you, Jonae. Good morning, everyone, and thank you for joining us on today's call. By now we hope you've had a chance to review this morning's press release. For the fourth quarter of 2011, the Company reported a net loss attributable to common stock holders of $6.2 million or $0.29 per share. Compared with a net loss attributable to common stock holders in the fourth quarter of 2010 of $2.6 million or $0.16 per share. The key reason for the increase in reported loss for the fourth quarter of 2011 was that in 2010, our net loss included non-cash, non-recurring gains totaling $4.7 million. For the year-ended December 31, 2011, the Company incurred a net loss attributable to common stock holders of $24.1 million or $1.21 per share. Compared with a net loss attributable to common stock holders of $22.7 million or $1.41 per share for the comparable period in 2010.

The Company's net cash burn for the year ended December 31, 2011 was $17.1 million compared with $15.7 million for the same period in 2010. The 2011 net cash burn figure reflects primarily the Company's efforts to support the Prophage Series vaccines. Our 2010 cash burn figure is net of non-recurring business development payments and tax credits totaling $2.7 million. Our cash and cash equivalents were $10.7 million as of December 31, 2011.

I'm very pleased to report that subsequent to the end of the year, Agenus strengthened its cash position by more than $15 million with two non-dilutive initiatives. Which include $9 million through an expanded agreement with GlaxoSmithKline. $6.25 million through a license of non-core technologies. In addition, we raised $2.8 million in equity issuances. Collectively, these activities have increased the Company's cash position by $18 million from the year-end 2011 cash position of $10.7 million. Which, at our current burn rate, would be sufficient to fund operations through 2013. Our net cash burn for 2012 is anticipated to be in the range of $13 million to $15 million. This burn projection is net of approximately $1.5 million in facilities-related savings related to the amendment of our Lexington, Massachusetts lease in April of 2011, reflecting our ongoing cost containment efforts.

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

Thank you, Shalini. I'm very pleased to report that 2012 is already proving to be an exciting year for us on a number of fronts. One, as Shalini indicated, we started the year by strengthening our balance sheet by $18 million. Two, the GSK news today of the expanded license and manufacturing agreement further validates QS-21 as a key adjuvant and expands its potential use in additional indications in the GSK biologics pipeline. Three, under the terms of the GSK agreement, we will receive a non-refundable payment of $9 million. Four, also, we agreed to grant GSK the first right to negotiate for the purchase of Agenus for certain of its assets. This first right to negotiate expires after five years.

In addition to all of this, we believe that 2012 could be a year marked with significant clinical milestones. In the past year, we have seen an acceleration of advances in the field of immunology and cancer vaccines. Both of our technology platforms are poised to benefit from this very exciting new trend. As most of you are aware, between Agenus and its partners, 18 programs are in clinical development. QS-21 is being studied in clinical trials of 15 vaccine candidates, of which four are in Phase 3 studies. Importantly, all four Phase 3 programs are due to report pivotal data over the next year or so.

These programs are diversified across different therapeutic areas and address large market opportunities. It is very rare for a small biotech company to be in a position to benefit from such an extensive portfolio of clinical programs. Once again, 15 out of 18 clinical programs are being pursued with the resources and expertise of the best-in-class large pharmaceutical companies.

Last year, we saw significant progress with our two core platform technologies. QS-21 containing vaccines advanced in the clinic. As you're probably more and more aware, QS-21 is a key component of a substantial number of prophylactic and therapeutic vaccines in clinical development. It strengthens the body's immune response to an antigen, thus making a vaccine more effective.

To highlight some of the progress made with QS-21 in the fourth quarter of last year, the New England Journal of Medicine published results of a Phase 3 trial of GlaxoSmithKline's biologics RTS,S malaria vaccine candidate. This candidate contains QS-21. This was a first major milestone for us, as it was the first time a QS-21 containing vaccine demonstrated efficacy in a large Phase 3 trial.

Over the next year, we anticipate important data readouts from Phase 3 pivotal trials of four vaccine candidates of GSK. These include MAGE A3 cancer immunotherapeutic for patients with non-small cell lung cancer -- and separately with melanoma. RTS,S for malaria and Herpes Zoster for shingles. I would like to point out that the Herpes Zoster program, which enrolled 30,000 subjects, has just been added to the list of programs that are due to report data over the next year to 15 months.

Just to reiterate, we're entitled to receive milestone payments as QS-21 containing programs advance. As well as royalties on net sales for at least 10 years after commercial launch of the first prophylactic and the first therapeutic product. Given that QS-21 is being studied in clinical trials for 15 vaccine programs -- including products in late-stage development, targeting billion dollar markets such as non-small cell lung cancer, melanoma, shingles, and Alzheimer's disease. This unique proprietary asset represents a significant and unusually diversified value driver for our Company.

Again, the QS-21 programs are funded entirely by our partners, benefiting from their financial development and sales and marketing resources. It is an extraordinary advantage for a company of our size to be in a position to benefit from the success of much larger established companies. I will now turn to our own proprietary pipeline programs beginning with HerpV.

HerpV is a novel and exciting recombinant off-the-shelf therapeutic vaccine for the treatment of genital herpes. Genital herpes is caused by the herpes simplex virus 2, also known as HSV-2. This vaccine uses both of our platform technologies. Heat shock proteins, also referred to as HSPs, and QS-21. Not only is HerpV the most advanced herpes vaccine in the clinical trials, but it is the only one, to our knowledge, which uses a polyvalent Antigenics construct, combined with one of the most powerful adjuvants available, our QS-21.

Last year, we reported positive results from a randomized four-arm placebo-controlled Phase 1 study of HerpV. This study was published in the peer-review journal, Vaccine. Our Phase 1 trial showed that 100% of the evaluable patients receiving HerpV incorporating QS-21, demonstrated a statistically significant CD4+ T cell response to HSV-2 antigens. In addition, 75% of these patients also demonstrated a CD8+ T cell response. I would like to note that eliciting both of these types of immune responses is a first-of-its-kind achievement in herpes immunotherapy.

As I mentioned, HerpV is the most advanced herpes 2 vaccine currently in clinical development. For the treatment of genital herpes, HerpV contains 32 HSV-2 related antigens. And was designed as a highly polyvalent product with the intent of treating a broad population of HSV-2 infected individuals. We're currently in the process of preparing manufacturing lots of HerpV for our Phase 2 trial, which is expected to commence during the second half of this year. It is anticipated that we could have initial results from this trial as early as the end of 2013. The Phase 2 study for HerpV will measure the effect of vaccination on viral shedding in HSV-2 infected individuals. Key experts in this field believe that a reduction in viral shedding could be the best predictor of a reduction in recurrent outbreaks and transmission. Given the significant unmet medical need represented by genital herpes, we believe that if HerpV is shown to be safe and effective, this therapeutic vaccine has a true blockbuster potential.

Finally, I will now discuss Oncophage and Prophage Series vaccines. Which are also referred to, as you know, as HSPPC-96 or vitespen. Both vaccines are based on our heat shock protein technology. In December, Agenus and NewVac LLC, a subsidiary of ChemRar announced a licensed, development and manufacturing technology transfer agreement for our Oncophage vaccine. ChemRar is a well-known entity in Russia and has agreements with large pharmaceutical companies such as Pfizer, Novartis and J&J.

As you may remember, Oncophage is approved in Russia for the treatment of adjuvant renal cell carcinoma. Under the agreement, we granted NewVac an exclusive license to manufacture, market and sell Oncophage. As well as pursue development programs for Oncophage in combination with NewVac's co-adjuvant technology. These activities would take place in the Russian Federation and in CIS countries. We are entitled to receive a transfer price and/or double-digit royalties upon Oncophage product sales, as well as potential milestone payments.

Moving along to our Prophage G Series vaccines. Prophage G Series are currently in clinical trials in two different settings of glioma. Newly diagnosed and recurrent disease. Glioma is the deadliest form of brain cancer, with an average survival of 6 to 14 months. Last year at ASCO, we presented, from a Phase 2 trial of Prophage G-200, that it showed 93% of the patients were alive at or greater than 26 weeks after surgery, with a median overall survival of 11 months. Importantly, measures of immune response post-vaccination demonstrated a significant and localized tumor-specific CD8+ T cell response. As well as innate immune responses as marked by a significant increase in levels of circulating NK cells.

Promising overall survival results from this trial support advancement of Prophage Series G-200 into a randomized study using a combination regimen. I would like to note that Dr. Andrew Parsa of the University of California in San Francisco, and lead investigator for the trial, will be presenting data on Prophage G-200 at the upcoming annual meeting of American Association of Neurological Surgeons which will be held April 14 through 18 in Miami, Florida. Our second glioma program, a Phase 2 trial testing the Prophage Series vaccine, G-100 in patients with newly-diagnosed glioma, is ongoing. In this trial our vaccine is being used on top of the standard of care which includes Temodar and radiation. It is believed that the efficacy of G-100 could potentially be enhanced through this combination regimen.

In closing, this is a very exciting time for the Company. Between Agenus and its partners, there could be as many as eight upcoming milestone events that could be reported over the next 15 months. All of this could be of great value to our Company and to our shareholders. With over a dozen clinical programs in development in GSK biologics pipeline, which contain our QS-21 adjuvant, we are pleased to be able to participate in the future success of the world's number one ranked vaccine company.

Thank you for your interest in our Company. We hope that you have found this update to be useful. I will now conclude my remarks. We are now ready to open up for Q&A.

(Operator Instructions) Ren Benjamin from Rodman.

Congratulations on all the progress. A couple of questions for you guys. One just having to do with this newly-negotiated agreement with Glaxo. It mentions that this is an option not just for other assets that you guys may have but all of Agenus, as well. Could you comment, can you give us a little bit of color around that? Is that something that you guys brought up or they brought up? How did that come about?

Ren, you're referring to the right to first negotiate and potentially purchase of Agenus or some of its assets. And this was, I'll speculate as to why they want to do this, because we don't know the details of their decision-making process.

But clearly, QS-21 is a very important asset for Glaxo. And if I were Glaxo, I wouldn't want the financial interest of this asset to be in the hands of another third party. So because of that, the Company wanted to have a first right to negotiate a potential transaction. And that's understandable.

From our perspective, we're in a situation where we believe, as a Company, that there is a very significant disparity between our intrinsic value and our value in the marketplace. And if we were to look at who is out there most capable of valuing the intrinsic value of Agenus, it would be GlaxoSmithKline since they know the programs, they know their potential.

And should there be an opportunity where the Company was being pursued as a target, that Glaxo will likely be the best candidate to value it properly. So, that is our reason for wanting to do this. Does that answer your question?

Yes, it does, thank you for that color. And just moving on with the GSK programs, can you maybe, in some sort of order, just place for us when we might be expecting the data from the ongoing Phase 3 trials? I know that I think in the past we were thinking about the potential for the melanoma results to be coming out in the third quarter, and maybe non-small-cell lung cancer in the fourth or early next year. Could you just give us the latest update on when these results could be expected?

I will tell you what GSK has published on these things. That's all we have the freedom to disclose at this time. GSK, in their published information, has said that they expect their, I believe, Phase 3 for melanoma to be out in the second half of this year. They've also said that their lung cancer trial will be out sometime perhaps as early as in the first half of next year.

And in the most recent filings, they have indicated that the shingles program results could be out as early as the next 12 to 15 months. So, those are the guidances that we can provide. Now, as to the malaria trial, they publicly disclosed that by the end of this year there will be additional data coming out on malaria.

Okay. And just I want to make sure that I have this correct. That the first right to negotiate for the purchase of Agenus or your assets does not impede, in any way, the ability for you guys to sign on additional partners to utilize QS-21 in other indications. Am I thinking about that correctly? Or do they have the right to first negotiation in any indication?

No, they do not. Actually, you're absolutely correct that we are free to out-license QS-21 for additional indications.

Perfect. And just a couple of other questions. I believe Shalini in her prepared remarks mentioned that you have enough cash now to take you through 2013. Was that 2013 or 2012?

2013.

Okay. And then I think in your prepared remarks regarding the HerpV program, you mentioned that results could be coming out in early 2013 which, at least I thought it would be a trial that would be pretty easy to enroll and potentially have data out earlier. Could you help me understand why the data might come out in 2013, as opposed to maybe the end of the year this year?

Okay, so let me just clarify a couple of things. We have not yet started our Phase 2 trial. We can't have data before the trial starts. So, the trial is slated to start by the end of this year, Ren. And the reason for that is because we're currently manufacturing GNP grade material in order to be able to inject patients with it.

So, that material will not be ready until the third quarter of this year. And so we're anticipating that shortly thereafter, the trial will begin. And you're absolutely right, that there's such a demand for enrollment in a trial like this that we're likely to have very quick enrollment. And so if we start the trial by the end of this year and have the kind of anticipated enrollment that we expect, we would expect to see data perhaps as early as within 12 months of the start of the trial, which will put us towards the end of next year.

Terrific. Okay, thank you for the clarification. Just switching gears to prophage real quick. I know you mentioned that there will be some updated results coming out in April presented by Andrew Parsa. Any other results that we could expect this year, maybe at ASCO or ACR, any of the other conferences? And probably more importantly, any further considerations regarding a Phase 3 study with a cooperative group?

The answer to your question as to whether or not we will present at ASCO or some other conference is, the answer is no. There are no plans at the moment to present at conferences other than what I indicated to you earlier. In terms of cooperative trials, those are still very much under consideration. And as soon as we have clarity on it or a decision, we will certainly put out a news release on the subject.

Okay. And then just one final question, on Friday you had issued an 8-K just talking about an ATM that was in place and the termination of a previous ATM. Could you just give us a little bit of color, why terminate the previous one and maybe how much was used?

Let me just give you a broad answer, and then we'll address the specifics. The broader answer is that, as you may recall, since we went public, we've had a shelf facility available. And then some years earlier, we put into place an ATM facility, as well. These are for the purposes of to make sure that the Company's in a state of readiness should there be a requirement for cash and should there be an opportunity on the favorable conditions to raise monies.

Now, for example, in the first quarter, we raised a little bit of money under ATM because we weren't absolutely certain as to the eventuality of these two deals that we announced, which netted us over $15 million. So before that, we wanted to have the flexibility and the luxury of having additional financial resources. And having these facilities that you're talking about allow us to act quickly on these fronts.

I can tell you that currently, we have no plans to issue equity at these current prices which we consider to be significantly undervaluing the intrinsic value of our Company. Particularly given the fact that there are, as I said earlier, eight potentially important milestones that may be upcoming over the next 12 to 18 months. Each one of which could add significant value to our Company.

So those are facilities. And I know every time you do a filing, there's some confusion as to whether or not you are imminently expecting to issue shares. And the answer is, particularly after the $15 million non-dilutive cash infusion into the Company, we have no plans of doing such at these prices.

Perfect. Thank you very much. Congratulations and good luck.

John Sonnier from William Blair.

Congratulations, Garo, to you and the team there on all of the progress. I'm wondering -- and I apologize if I missed this -- what was the source of this $6.5 million inflow? Which assets specifically did you out-license or divest?

These are some assets. We haven't disclosed details on this. And I apologize for that, but we have not. And that's for competitive reasons for the sake of the purchaser. One thing that I'd like to highlight, John, we said both transactions, particularly this particular transaction, is through the divestiture of a non-core asset.

And this asset is really below the radar screens of anybody. And it involves some of the intellectual property that we had purchased many years ago. And so we'll obey by the wishes of the purchaser and not disclose the details.

Okay. That's fair enough. And just to be clear with this GSK arrangement, strategically, it doesn't preclude a competitive process. Does it essentially just require you, if you're approached by a party other than GSK, to notify GSK?

Just to be clear, this is not a right of first refusal. Clearly, if it was a right of first refusal, it would make things a lot more restrictive for us. It is the rights to first negotiate, which has certain terms, and those terms may or may not be made public with our filings soon.

But suffice it to say that none of what we did hampers the value exploration or value enhancement of the Company, should there be a competitive process, as you suggested.

Okay, thanks a lot.

Megan McCloskey from MLV & Co.

Congratulations on the expanded license announced this morning. That's really exciting to see. I have a question in relation to HerpV. The HerpV product is really groundbreaking, in my view, for being able to elicit a T-cell response, specifically a CD-8 T-cell response. How are you designing the Phase 2 trial moving forward? What are your readouts going to be?

We actually have the trial protocol completely worked out. And this has been with substantial input from some, or, I should say perhaps, all of the top leaders in the field. The trial design will allow us to measure the reduction in viral shedding days of already infected individuals.

So individuals do what's called a cut-and-swab for, I believe, 40 days prior to vaccination. And it is known that individuals who are infected with herpes shed virus at least on some days. Not perhaps on every day, but some days. So we will measure the number of viral-shedding days prior to vaccination and do the same thing post vaccination.

And if there is a, let's say, a 30% to 50% reduction in viral shedding days, that is considered by the experts to be a very good proxy to clinical outcomes. And that will certainly pave the way for us to design an appropriate Phase 3 trial that will be based on clinical outcomes, which will be reduction in viral outbreaks of herpes.

Fantastic. And do you have any indication at this point that the T-cell readouts are predictive of that shedding reduction?

The simple fact is the following. Because there are no effective immunotherapeutics for herpes so far, it's impossible to demonstrate the correlation between generation of T-cells and clinical outcomes. Such a study has never been done to link the two. However, based on all intelligent data so far, which is scientific data, we believe there is a very close link.

Particularly when you generate an appropriate dual immune response, which is the combination of CD-4 and CD-8 positive T-cells. Only because in the clinic, a reduction in viral outbreaks and the presence of these two cell types, immunological cell types, have been associated. So, while there's no outcomes association there's some suggestion that they will be linked.

Okay, fantastic. Thank you so much.

Natali Bansal, investor.

Yes, good morning. I have a suggestion as to a financing device you might consider. And that is to give your long-suffering shareholders, confer upon them, the right to buy a convertible debenture, properly priced and so forth because it's a long, long wait we've had. Secondly, I'd like to ask what is supposed to happen when a shareholder writes the lead director?

What was the second question again?

What is supposed to happen when a shareholder writes to the lead director?

What is supposed to happen if a shareholder corresponds with the lead director?

Yes.

I don't know what's supposed to happen but certainly our shareholders are free to do that.

I was free to do it over a year ago and I never got any response whatsoever.

I would suggest that you check the proper address, and I'm sure you will get the attention of our lead director who is an extremely diligent person.

Whoever the lead director was a year ago did not respond. Anyhow, my third comment and question is what are you doing to have a more vigorous financial PR?

Thank you for the first suggestion. And as far as financial communication, as you may know, Jonae Barnes joined the Company about a year ago. And we haven't really had that function occupied up until she came onboard for quite some time, actually.

And I think we have already seen a significant streamlining of communications with shareholders, as well as the press and the media since her arrival. And it is an area of importance for us, particularly because of the upcoming year, when we expect substantial news flow to be able to drive value for our shareholders.

I was surprised, for example, after the Annual Meeting that your website seemed to have nothing covering your remarks. Now, that's an opportunity for you to get comment out there for a Company that's very small. And my suggestion, a specific suggestion to you, because I did this work for McMillan many years ago, is to start holding small lunches or dinners with some of the institutional investors. Because then, if and when we hope, your stock hits $5, they will be familiar with the Company and they will be able to buy it.

That is not the time to start an education program with them. The time is now. And you could fit it in among your various travels, pick the big institutional investor cities and have small dinners.

Thank you, and thank you for all of those very good suggestions. We have been doing some of these things and certainly we are on path to accelerate them.

Fine. Thank you.

(Operator Instructions) Bobby Cohen from Revolution Investment.

Congratulations on this past event. My question is, I just would like to know that over the last 90 days has anyone on the Board been approached by anyone to possibly take over the Company? It just seems that this Glaxo announcement is almost like a -- I mean, don't get me wrong, extremely positive -- but almost like -- I can't verbalize the correct wording. But it is almost like somebody putting something in place, because there may have already been overtures by other parties. I know I'm just speculating, but I figured I'd ask you guys that.

Thank you very much for the question. But as you know, we have never commented on such speculation and will not going forward. So, I cannot deny or verify your comments.

I'm not asking for anything specific, but if there was something material, would you have to just state it in an 8-K that the Company has been approached? Or where do you stand on that?

Any time our attorneys deem something to be of material nature, we certainly put out a communication regarding that.

Okay, thank you. And again, terrific job guys. Thank you.

There are no further questions at this time.

Great. Thank you. And I would like to remind listeners that a replay of this call will be available approximately two hours after the call through midnight Eastern Time on September 5, 2012. The replay number is 855-859-2056 domestic, or 404-537-3406 international. And the access code is 54303509. The replay will be available on the Company's website approximately two hours after the live call. If you have any additional questions after today's call feel free to call us at 800-962-2436. Thanks a lot.

Ladies and gentlemen this does conclude today's conference call. You may now disconnect.