Agenus Inc (AGEN) 2012 Q2 法說會逐字稿

Good morning. My name is Nick and I'll be your conference operator today. At this time I would like to welcome everyone to the second quarter 2012 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.

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

Great. Thank you, and thank everyone. Welcome to Andenus' conference call to discuss the financial results for the second quarter 2011. With me today is Dr. Garo Armen, Chairman and CEO, and Christine Klaskin, Vice President of Finance. During this call we will review our financial results as well as provide a corporate update. We will then open up the call to 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 development and commercialization efforts, time lines, availability of data, and potential efficacy and market potential 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 release and they are disclosed in more detail in our most recent filings with the U.S. Securities and 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 this cautionary statement. When evaluating Agenus' business and securities, investors should give careful consideration to these risks and uncertainties.

As a reminder, this call is being recorded for audio replay. With that, I will now hand over the call to Christine, who will review our financial results for the second quarter 2012.

Thank you, Jonae. Good morning, everyone and thank you for joining us on today's call. By now we hope you've had the opportunity to review this morning's press release.

For the second quarter of 2012, we reported a net loss attributable to common stockholders of $7.1 million or $0.31 per share, basic and diluted. This compares to a net loss of attributable to common stockholders in the second quarter of 2011 of $6.0 million, or $0.31 per share, basic and diluted.

Cash used in operating activities was $3.3 million for each of the quarters ended June 30, 2012 and 2011.

For the six months ended June 30, 2012 we incurred a net loss attributable to common stockholders of $551,000, or $0.02 per share, basic and diluted. This compares to a net loss attributable to common stockholders of $12.1 million, or $0.64 per share, basic and diluted, for the comparable period in 2011. The decrease in net loss for the six months ended June 30, 2012, compared to the same period in 2011, is due to the revenue generated of $13.4 million during the first quarter of 2012, primarily related to the onetime payments received through an expanded agreement with GlaxoSmithKline, or GSK, and through a licensed of noncore technologies.

Cash provided by operating activities for the six months ended June 30, 2012 was $7.9 million compared to cash used in operations of $8.7 million for the comparable period in 2011. Cash and cash equivalents were $25.5 million as of June 30, 2012.

During the quarter, we increased our cash position by approximately $4.5 million through equity offerings. Based on our net cash burn for 2012, defined as cash used in operating activities less onetime upfront payment plus capital expenditures and dividend payments, which is anticipated to be in the range of $13 million to $16 million, we expect sufficient financial resources to fund operations through 2013.

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

Thank you, Jonae and Christine. I will now discuss our progress in the first half of 2012.

This is an exciting year for Agenus on a number of fronts. We have seen steady progress in the advancement of our QS-21 adjuvant for both infectious disease and cancer indications through our corporate partner GSK.

In addition to our expanded QS-21 agreement with GSK, which was announced during the first quarter of this year, we recently have seen a new Phase III clinical program, which was initiated for the prevention of shingles in immunecompromised patients. This is a randomized, placebo-controlled Phase III clinical trial in approximately 1,400 patients.

GSK has four QS-21 containing Phase III programs underway, which will have their readout in the near future. They include two MAGE-A3 cancer vaccines, one for non-small cell lung cancer and the other one for melanoma patients. The other two are the RTS,S vaccine for malaria and HZ/su vaccine for shingles.

In addition to QS-21, we have also made steady progress in advancing our Heat Shock Protein Platform during the first half of 2012. During the second quarter, the National Cancer Institute approved a study of the Prophage series G-200 vaccine in a large, randomized Phase II trial in combination with Avastin in patients with surgically resectable recurrent glioblastoma.

This study will be sponsored by the Alliance for Clinical Trials in Oncology, an NCI cooperative group. The trial will investigate the combination of G-200 and Avastin in a three-arm randomized study of approximately 222 patients with surgically recurrent glioma. This study will use overall survival as its primary endpoint and will compare the efficacy of G-200 given with Avastin, either concomitantly or upon progression versus Avastin alone.

Also during the second quarter, additional data and analysis from a Phase II study for Prophage G-200 in recurrent glioblastoma patients was presented at a plenary session at the 80th American Association of Neurological Surgeons annual scientific meeting.

The data presented showed that G-200-treated patients lived significantly longer than 86 comparable patients treated with alternative therapies during the study period. In the analysis, both G-200 treated groups and the control patients underwent greater than 90% resection of recurrent GBM and had had chromoscopy performance status of better than 70%.

The median overall survival for control patients in this study was only 32.8 weeks, with a six-month survival of 68%, as compared to a median survival of 47.6 weeks and a 93% six-month survival rate for the vaccine-treated group. This analysis had a P-value of better than 0.01.

More recently, an article titled "Immunotherapy for Glioma, Promises and Challenges" was published in the July edition of the peer-reviewed journal, Neurosurgery Clinics of North America. The article specifically describes the ways in which tumors limit effective communication with immune cells, secrete immune inhibitory cytokines and molecules, and express molecules that induce apoptosis of immune cells.

It also defined three different immunotherapeutic approaches to counter this tumor-associated immunosuppression. One is cytokine therapy; two is passive immunotherapy; and a third one is active immunotherapy, which includes our Agenus Prophage series of vaccines.

Also, we anticipate that during this quarter a manuscript of Phase I clinical results of Prophage Series G-200 in recurrent glioma will be published in a peer-reviewed scientific journal.

In addition to recurrent GBM, with G-200 and a planned Phase II cooperative group study, a Phase II trial evaluating the Prophage series G-100 vaccine in patients with newly diagnosed glioma, is now fully enrolled.

I'm also pleased to report that Agenus met the qualifications to join the broad market Russell 300 Index. Russell 2000 Index and the Russell Global Index and the Russell Microcap Index. We expect our new presence in these four indices will expose Agenus to a wider range of institutional investors, allowing us to broaden our shareholder base.

Let me now look at the progress seen during the first half of 2012 and how that will relate to what you may expect from us in the rest of this year and into 2013. So let me briefly discuss now what lies ahead.

With regard to our QS-21 program, it is anticipated that results from the second Phase III trial of RTS,S for malaria, in infants 6 to 12 weeks old, will be available in the fourth quarter of 2012. The two MAGE2-A3 programs for melanoma and non-small cell lung cancer are event-driven trials; meaning that the trials will continue until a fixed number of events have occurred and results from these trials should be available in 2013, according to the latest quarterly report by GlaxoSmithKline.

As a reminder, we are entitled to receive milestone payments as GSK's 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 separately the first therapeutic product.

With over a dozen QS-21-containing clinical programs in development in the GSK biologics pipeline, we are certainly pleased to be able to participate in the future success of world's number one ranked vaccine company.

Now let me turn to our Heat Shock Protein platform. With regard to the National Cancer Institute approved study of Prophage Series G-200 vaccine plus Avastin combination trial in recurrent glioblastoma, we're currently finalizing the protocol and we anticipate that the alliance could begin enrolling patients around the end of this year or in early 2013.

With respect to our partnership with NuVax in Russia for oncophage, NuVax is continuing to make progress in building out a manufacturing facility - that process has started - preparing for commercial launch and establishing additional clinical development programs with Prophage.

Finally, we look forward to the initiation of our Phase II trial of HerpV for the treatment of genital herpes in the fourth quarter of 2012. As a reminder, HerpV is a novel and exciting recombinant, off-the-shelf therapeutic vaccine for the treatment of genital herpes, which is caused by the Herpes Simplex Virus II, also known as the HSV-2 virus.

Given the significant medical need represented by genital herpes, we believe that if HerpV is shown to be safe and effective, it has a true blockbuster potential. HerpV contains 32 HSV-2 derived immunogenic antigens and was designed with the intent of treating a broad population of HSV-2 infected individuals. We're currently in the process of preparing our manufacturing lots of HerpV for our Phase II clinical trial.

We're particularly excited about the HerpV product for several reasons. First, in contrast to longer and more expensive trials in oncology, it is anticipated that we could have initial results from our HerpV trial as early as the end of 2013. This is due to the fact that the Phase II study for HerpV will measure the effect of vaccination on viral shedding in HSV-2 infected individuals. By the way, which key experts lead in the field that would be the best predictor of eventually showing a reduction in recurrent outbreaks and transmission from this disease.

Second, HerpV uses both of our platform technologies, HS-14 and QS-21. Not only is HerpV the most advanced herpes vaccine currently in the clinic, but it is the only one, to our knowledge, that uses a polyvalent antigenic construct combined with one of the most powerful adjuvants available, which is our QS-21.

In closing, we are excited about our future between Agenus and its partners. There are a number of upcoming milestone events, all of which could be of great value to us and to our shareholders. Importantly, our strengthened financial position during the first half of this year allows us to reach these key milestones with our existing resources.

Once again, thank you very much for your interest in Agenus. We hope that you have found this update to be of help and we will now conclude my remarks and we're ready for Q&A.

(Operator Instructions) John Sonnier, William Blair & Company LLC

Hey, thanks for taking the question and congratulations on a lot of progress. Garo, you went through a lot of information, a lot of clinical programs. What might be helpful is just look forward, maybe this day next year, a year from today, give us, I guess, a picture of what it could look like. What reads out between now and a year from today and then kind of how does that shape the profile of the Company?

Let me paint a picture, John, of what could certainly happen. As I said in my call, the malaria trial, the second control of trials results on a very large Phase III trial will be out and that will further confirm the efficacy of both the malaria vaccine and the attributes of QS-21 in powering an unprecedented vaccine.

As you know, there are no other malaria vaccines that have shown to be efficacious thus far, so this is a major milestone. Although malaria is a public service product and the commercial impact will be more modest. For a Company of our size, it won't be significant, but it will certainly be more modest. as compared to the potential blockbuster potential of the MAGE3 program.

Now, in the first half of next year, so this time next year, we could have the results out of both the melanoma program, that's the MAGE-3 vaccine, as well as the lung cancer program. If these programs are positive, clearly not only will this mean a tremendous advance for cancer patients, but it will also mean a game changer for our Company.

It will result in a potential royalty stream for us, which is going to be very significant, particularly in relation to the size and the scope of our Company and there are various estimates by analysts out there in terms of what the size of this market can be for GSK. GSK has made a number of public remarks about how excited they are for these programs or seeing these programs come to potential fruition. But, given our size, the impact on us would be orders of magnitude greater than the impact on GSK, so we could have that.

By the middle of next year we could be well underway in terms of the enrollment of the NCI-sponsored randomized trial, which will be the first randomized trial in glioma, and very importantly, the first trial that will test Oncophage in glioma in combination with a standard of care right now, which is Avastin for these patients. And the excitement of this is that, as you know from the earlier studies, even though these are single arm studies, we've seen some very, very exciting results when we do an analysis in comparison to an honest reference arm.

Now, if we can combine Prophage with a product like Avastin, which is not only the standard of care in the field but there are also scientific and clinical reasons to believe that synergies exist from a mechanistic perspective, this could be an exciting program. And that trial being well underway will get us closer to the finish line in terms of readouts and again, this would be by the middle of next year.

We could be all but completely enrolled in our HSV-2 vaccine program by the middle of next year. As I alluded to, this is a relatively quick trial with quick readouts and we would hope that with the readouts would come in as early as the end of next year.

So lots of programs getting more and more traction, if you will, between now and the next 12 months. But getting to the bottom line in terms of financial and commercial impact, certainly the MAGE-3 programs are something to watch for very closely and as well, the malaria program with additional data would get us to a comfort level as to the financial windfalls coming from that.

Does that answer your questions?

That's a great overview and Garo, you've been at this a long time. I have to think this is the most formative window of six months to a year in the Company's history. Is there, alongside of that, with malaria, I guess, or the MAGE programs in particular, are there milestones tied to Phase III readouts?

There are milestones that, John, will be paid based on reaching a certain timeline. I know it sounds strange to say that, but, for example, there are milestones that will be paid to us because we've reached the end of this year, for example.

I see.

So these are time-related milestones. There are additional milestones that will be payable upon filing the first BLA or NDA applications associated with these products. There are also other milestones from other companies that I didn't allude to in our remarks today. For example, there are milestones associated with our Alzheimer's program with J&J, [Ram] and Kaiser and those two will be payable upon the achievement of, for example, initiation of a Phase III trial.

Very helpful. Well, congratulations on the progress.

Thank you very much.

Joe Pantginis, ROTH Capital Partners LLC

Hi guys, good morning and thanks for taking the question and thanks for the update, Garo. First a question, if you don't mind, on the recurring glioblastoma study that's upcoming, the randomized study. As you know, recently we had discussions with a KOL in the space who really focused on the aspects of how stringent the process is to get involved with the Alliance and then it was, obviously, a feather in your cap that the Alliance was very accepting and wanted to really be involved with this study.

So, with that said, I was just wondering if we could get more of a present day update of what's going on behind the scenes and sort of the growing interest, presumably, of the physicians for this study and then I have a follow-up. Thanks.

Certainly, Joe. As you said, the field has gotten a lot more competitive; meaning because of the scarcity of monies, the scrutiny applied to NCI-sponsored trials is much greater today than it was several years ago. So we're very delighted by the fact that Alliance and NCI chose to undertake this significant study.

As you know, it's a very large study. It's a randomized study, so the cost and the effort associated with underwriting this study for NCI is not insignificant and so that's a very nice complement for our program. But also, as you know, there isn't much going on in the field of glioma and so there is a level of enthusiasm by the key opinion leaders and the practitioners, clinicians to engage in a study where there is a clear rationale, a clear path as to why one could expect a potential positive readout.

Avastin is an approved product, but its effect is marginal and so to augment the effect of a biologic that seems to have some underlying immunological activity with a targeted vaccine like ours that has a clear immunological activity, the combination of the two could be a very exciting outcome.

So we're very, very honored to be a part of this program and honored to have a critical number of physicians who, by the way, went to through the process of this approval with Alliance and the NCI on our side. So, because of this pressed enthusiasm, our hope is that the enrollment will be rather expeditious in this trial.

Oh, that's helpful and then you raised the point, actually, before my second question about combining the two products. Obviously each has its potential activities, but also, I guess more to the potential synergies, because if I recall correctly, the role of VEGF actually has an inhibitory effect on dendritic cells and using Avastin could actually bolster the effect of Prophage.

That's exactly right, Joe.

Okay. Great, thanks, and then just so the second question is, I guess, more of a macroscopic aspect when you look at the Company. I guess the hard aspect of the question is you have so much going on right now with all these different programs and I guess the hard part of the question would be what are you most excited about.

I know you talked about your enthusiasm about the HerpV program, so I guess I'll ask the question a little different. When you look at all your programs what you believe would be, say, the top one or two programs that you think might have the most hidden value are not getting credit for on the Street.

Well, I will put it this way. Certainly the outcome from the MAGE-3 trial would be a validation of the cancer vaccine therapeutic field, because the MAGE-3 vaccines are truly cancer vaccines. They're not sort of going about this in a roundabout way.

This is a targeted vaccine powered by powered by QS-21 targeting a specific antigen that is known as a cancer antigen, so the trial is very well designed and optimized because it enrolled patients who are MAGE-3 over expected, a very large number of patients, 2,200 patients in one trial and 1,300 in the other trial. So the outcome from these trials will be a game changer for patients, the industry, certainly GSK, but very importantly in terms of the impact on us it'll be a game changer.

Also, very importantly, there are a significant number of other candidates in the GSK pipeline that target different antigens, which also use QS-21 by the way, and those vaccines will be very aggressively developed for launch. So that MAGE-3 program is a major, major driver commercially and otherwise for us and also a big deal for patients.

But, in addition to that, we have our HerpV program. Now this is a vaccine, as I said, not only is this a most advanced clinical vaccine program in the field of herpes today, it sounds strange because it's in the hands of a small company like our, but it is the most advanced program. There is no other that's ahead of us.

But this vaccine has shown some immunological and multi-antigen-related attributes that we have not seen with any other herpes vaccine in the past. Meaning if you have a product that does more of the same as other failed programs, you'd be a little skeptical, but our product does things that no other vaccine has shown in terms of its activity.

So that's an exciting program and frankly, if we finally succeed with the herpes vaccine, I can't tell you what the potential of this would be. It's a very, very significant blockbuster potential product and our challenge here is how do we make sure that we advance this program and not prematurely give away a lot of the upside associated with it to a potential partner. So that would be something to manage very, very closely.

Now, thirdly, the Avastin combination with Prophage could also be a very exciting program. Now, as you know, up until very, very recently, there were no opportunities to combine immunotherapeutic agents in order to further leverage the activity associated with vaccines, cancer vaccines that is. There are, since the introduction of several products like ipilimumab and others, there's a slew of activity with these combinations now and we are not behind, certainly not behind.

We may be, in some cases, ahead of others because this is a randomized trial and it's an indication that's a very tough indication or an indication where there isn't much going on, so any activity there, even with a randomized Phase II trial, could be very meaningful from a regulatory perspective as well as a patient perspective.

That's very, very helpful. Thanks a lot, Garo.

George Zavoico, MLV & Company

Hi, Garo, hi Jonae, hi Christine. Again, congratulations for setting up what could be an extraordinary second half of this year and first half of next year. A couple of questions regarding the GBM trial that you talked about, the results of which you talked about at the AANS meeting. We're already like three months past that.

I'm wondering if you could -- if there's any additional data as to the durability of some of those responses. You had an absolutely great six months survival rate. Is that holding out at nine months, if you know that data, and what's -- how long is the longest survivor in that trial lived?

Well, George, as you know, the only reason we've reported the six months and also the percentages that we've given is because the trial was designed to follow patients for a certain period of time. Now, if the question is have any of these patient been cured, the answer is no. This is a deadly disease, so it's a question of how much you can extend their lives and the measures we've given is that eventually all of these patients will succumb and die. So there is no real ambiguity about that.

Now, the combination trial, on the other hand, is a whole different story. That's the NCI trial, obviously. Will there be additional presentation on the clinical outcomes from this trial? I would say that maybe probably a publication associated with it just like there was a publication with the Phase I trial, but I don't anticipate that additional data analysis will she'd any more light than what we have seen.

So, the question, the key question for these patients is how many weeks can you extend their life and what the quality of life for them is during that period of time, which I hope all of that will be captured in the context of the publication that will come out.

Okay. And with regard to the trial that's coming, the Avastin trial, combination Avastin trial, it's obviously done with the NCI. Avastin is a very expensive drug. Are all the costs of that trial being picked up by the NCI?

The question is -- the last part of the question once again? Can you repeat, George.

Well, basically it's a very expensive trial. I mean, Avastin is not a cheap drug. It's a 220-patient trial. How -- what do you anticipate the cost of that to be and how much of the cost is coming out of your budget, if any?

Okay, so the answer is because this is an Alliance/NCI sponsored trial, we have no cost associated with it, with regard to any of the agents that are going to be used in combination, right, like Avastin is. So the only thing we do, Georg, is to provide them with our products and all of the trial effort is underwritten by Alliance and NCI.

If there are some additional ancillary studies that would be a part of the trial, at our request we may provide a very modest grant associated with it. But certainly Avastin costs have nothing to do with us.

Okay. That's great. And then, finally, I have a question about the HerpV trial. This Phase II trial --.

Before you get into that question --

Sure.

-- the Head of Clinical Development, Kerry Wentworth, just passed me a little note saying that the longest survival, a survivor in the trial that you were referencing before, is over two years.

Oh, that's great. That's great. Thank you for that. And with regard to HerpV, like you said, the primary endpoint here is viral shedding, so you can make it a fairly short trial. I presume you will also be measurements outbreaks during that period and the follow-on question to that is that if the trial is successful and you have significant viral shedding, improvement in viral shedding, do you anticipate a Phase III trial will be the rate of outbreaks? Will that be what will have to be the endpoint in the registrational trial?

Right, so the reason we're doing this trial that's measurements viral shedding is because when we met with the key opinion leaders, which numbered about seven or eight, before we decided to initiate this trial, it's a universal conviction that reduction in viral shedding - that is, in viral shedding days prior to vaccination, as compared to post vaccination - is really the gold standard correlate to potential clinical activity.

As you know, in our earlier trial we measured immunological activity and saw some unprecedented immunological activity in the context of both CD4 and CD8-mediated immune response. That combination of the two was unprecedented.

The next major milestone, which will be a very important correlate for clinical activity, is going to be this reduction in viral shedding days and so this trial will strictly capture that and will be a meaningful enough of an endpoint for us then to do a larger trial that will do what the regulatory standard for activity is and that would be outbreaks of the disease.

And is that based on the kind of patients you'd be enrolling and the response you've seen or you're predicting -- you're hoping to see with the viral shedding. Would that be over a period of a year or two years? I'm just wondering about how long that trial might be.

Okay, so are you talking about the current trial that we're going to undertake?

No. The current trial is going to be pretty quick. I'm talking about when you might be considering for the Phase III registrational trial.

That would probably be a one-year period, but certainly the details of that protocol need to be worked out indeed after the results from this trial.

Sure.

But typically it would be one year.

Yes, so that also could potentially be a fairly quick trial.

Yes.

Yes, okay. Thank you. I'm really looking forward to the next several months, Garo. Good luck. Thank you.

Thank you.

(Operator Instructions) Mara Goldstein; Cantor Fitzgerald

Oh, thank you very much. Just two things. Could you remind us about the GSK MAGE-3 and royalties? Is it a tiered royalty based on sales or a flat rate and is the royalty triggered on first sale of product? And I apologize if I missed this, but are you still expecting the Phase II data for the Alzheimer's program sometime this year and if so, is there a milestone associated with that as well?

Sure. The first question is it's not a tiered royalty. It is a flat royalty and we've said, in the past, it's in the mid-single-digit range. In terms of the initiation of the royalty upon sales, it's the royalty is triggered. And with regard to the Alzheimer's trial, this Phase II program containing QS-21 has been underway for some time now.

It's a multiple trial that has been underway and so while there was no real, Jonae has tasked me, it's a total of 9, actually, Phase II trials and it's our belief that there is some interest by the sponsors to see the outcome of the BAPI trial, at least. And that may or may not influence the speed and the structure of the Phase III trial that will be getting underway with the active vaccine that contains QS-21.There is a milestone associated with the initiation of a Phase III study.

Okay, so is it fair just to characterize that it might be your belief that any news about that, the vaccine trial, won't really be known until after some time in the fourth quarter in terms of the momentum, the forward movement, rather, of that trial?

If you mean the -- I believe the news about BAPI is the trial that's expected now in ApoE4 absentee patients. That result will be out in the fall, I believe.

Right.

And so any development with regard to the next steps for the active vaccine product will probably not come until after that.

Okay and just if I can sneak one more in, just with respect to you made a mention of equity sales in the quarter, so I'm assuming that these came from the open ATM program. Can you just give us a status update as to where that stands?

That, we take advantage of opportunistic price movements from time-to-time and we've made some sales during the quarter, yes.

Okay. So are you able to speak to just what is left on that program?

Well, it's not so much what's left on the program; it is really driven by our decisions at any given moment to make sales or not to make sales and we've been very price-conscious.

Right.

As you could see. So we have done this from time-to-time with price allocations and no other bells and whistles that would come with typically other equity offerings. Certainly there are no warrants or anything like that associated with the sales. So we've thought, from time-to-time, when the price is right and we need a little additional cushion on our balance sheet, it would be appropriate to do it then.

We're in a much more comfortable position right now than we were in the beginning of the year, so we'll evaluate any future actions on that from time-to-time.

Okay. Thanks very much.

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

Great. Thank you. I would like to remind listeners that a replay will be available approximately two hours after the call through midnight Eastern Time on February 3, 2013. The replay number is 855-859-2056 domestic, or 404-537-3406 international and the access code is 10811038. The replay will also be available on the Company's website approximately two hours after the life call. If you have any additional questions after today's call, you may call us anytime at 800-962-2436. Thank you very much.

This concludes today's conference call. You may now disconnect. 5