Agenus Inc (AGEN) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Agenus Q4 earnings conference call. As a reminder, today's conference is being recorded.

At this time I would like to turn the conference over to Ms, Christine Klaskin, Vice President of Finance. Please go ahead, Ms. Klaskin.

Thank you. Welcome to the Agenus conference call to discuss our fourth-quarter and year-end 2014 financial results.

Before I continue, I would like to remind you that this conference call will contain forward-looking statements including statements regarding the Company's potential income stream, research and development and clinical trial activity, the publication of data and potential application of the Company's technologies and product candidates in the prevention and treatment of diseases.

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 and Exchange Commission.

These statements speak only as of the date of this call and Agenus 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 Agenus's business and securities, investors should give careful consideration to these risks and uncertainties.

As a reminder, this call is being recorded for audio broadcast.

With me today are Dr. Garo Armen, Chairman and Chief Executive Officer, and Dr. Robert Stein, Chief Scientific Officer. During this call we will review our financial results as well as provide a corporate update. We will then open up the call for questions.

With that, I will now review our fourth-quarter and year-end 2014 financial results.

Cash, cash equivalents and short-term investments were $40.2 million as of December 31, 2014. Subsequent to year-end, the Company received an additional $60 million from its global alliance with Incyte. For the fourth quarter, Agenus reported a net loss attributable to common stockholders of $26 million which includes $14.3 million of non-cash charges bringing our quarterly cash burn to approximately $11 million. This represents a net loss of $0.41 per share basic and diluted, compared with a net loss attributable to common stockholders for the fourth quarter of 2013 of $5.8 million or $0.16 per share basic and diluted.

For the year ended December 31, 2014, the Company incurred a net loss attributable to common stockholders of $42.7 million or $0.71 per share basic and diluted compared to a net loss attributable to common stockholders of $33.2 million or $1.12 per share basic and diluted for the comparable period in 2013.

The increase in the net loss attributable to common stockholders for the year ended December 31, 2014 compared to the net loss attributable to common stockholders for the same period in 2013 was primarily due to our acquisition of 4-Antibody in February this year. In addition to increased operating expenses, we recorded non-cash expense of $6.7 million due to the fair value adjustment of the contingent purchase price consideration and non-cash income of $3.1 million related to the results of various trials of QS-21 Stimulon containing vaccines at GlaxoSmithKline.

During the same period in 2013, the Company's preferred stock restructuring resulted in a non-cash deemed dividend of $2.9 million and the retirement of its then outstanding $39 million 8% senior secured convertible notes due August 2014, resulted in a non-cash expense of $3.3 million.

The increased net loss attributable to common stockholders for the quarter ended December 31, 2014 compared to the net loss attributable to common stockholders for the same period in 2013 was as well due to increased expenses related to our acquisition of 4-Antibody. We also recorded non-cash expenses for the quarter ended December 31, 2014 of $6.6 million due to the fair value adjustment of the contingent purchase price consideration and $7.7 million related to the fair value adjustment of our contingent royalty obligation.

With that I will turn the call over to Dr. Garo Armen.

Thank you, Christine. Thank you all for joining us this morning.

2014 was a transformative year for Agenus. With our acquisition of 4-Antibody last February, Agenus today has a broad portfolio of novel immuno-oncology programs focused on checkpoints. In addition, we have a very powerful platform to discover antibodies to other novel agents and a combination of strategic alliances with leading partners.

We have also positive data from a Phase 2 study involving our autologous cancer vaccine and Dr. Robert Stein will tell you more about the details of that.

As you will hear more from also Dr. Stein, these initiatives are now supported by a world-class R&D organization with expertise in immuno-oncology, antibody generation, bio-informatics and translational biology that will help us discover and develop the next generation of paradigm shifting treatments for cancer patients.

To summarize the key highlights, one year ago we acquired 4-Antibody with its portfolio of checkpoint modulator programs and the Retrocyte Display technology platform for the discovery of antibodies. And since then, we have successfully advanced development candidates into IND enabling studies and leveraged this acquisition into two strategic alliances with leading partners in immuno-oncology, one with Incyte and the other with Merck, both leaders in the field.

In addition, our partner GSK reported remarkably positive Phase 3 results from their shingles vaccine candidate containing our QS-21 Stimulon adjuvant providing an opportunity for Agenus to receive potentially significant royalty payments.

GSK also filed its malaria vaccine candidate with EMEA which could potentially lead to regulatory approval of the first ever malaria vaccine this year. While royalties from this product are expected to be modest, it is a very significant advance in the fight against this deadly disease with the potential to save hundreds of thousands of lives annually.

We also reported promising Phase 2 study results from our Prophage personalized vaccine program for the treatment of newly diagnosed glioblastoma multiforme, or GBM, which is as you know, the most common primary adult form of brain cancer and we are evaluating various options for advancing the promising treatment into Phase 3 studies.

Let me now spend a few minutes on very recent developments as well as goals for 2015. We began 2015 with a global immuno-oncology alliance with Incyte that combines Incyte's proven track record of success in drug discovery, development and commercialization with our expertise in immuno-oncology biologics, specifically checkpoint modulator antibodies. This partnership with Incyte is initially focused on advancing checkpoint modulating antibodies against four key immune checkpoint targets, GITR, OX40, TIM-3, and LAG-3. GITR, OX40, TIM-3 and LAG-3.

For the GITR and OX40 antibody programs, we will co-fund product development equally and share profits 50-50 with Incyte with potential for us to receive additional payments based on achievement of specific milestones.

The TIM-3 and LAG-3 programs are royalty bearing programs. They will be funded entirely by Incyte with the potential for milestone payments for up to $155 million per product and tiered royalties on product net sales at rates ranging from mid-single digits to low double digits. We also have the option to co-fund these programs to the extent of 30% of the total expenditures and this will be in exchange for enhanced royalties.

In addition to initial four target programs in the alliance, both parties will have the option to jointly nominate and pursue additional targets within the framework of this multiyear collaboration.

As Christine mentioned, we received both an upfront payment and an equity investment from Incyte totaling $60 million strengthening our financial position. The Incyte partnership is the second corporate collaboration that was established around CPMs in the past year. During the second quarter of 2014, we announced our first pharma CPM collaboration for two novel, undisclosed CPM targets which are proprietary to Merck. As you know, Merck is a recognized leader in the field with their FDA approved PD-1 blocker, Keytruda.

As we previously noted, success in this collaboration could provide Agenus approximately $100 million in milestone payments as well as royalties on worldwide product sales.

As I mentioned earlier in the fourth quarter our partner GSK reported positive results from a Phase 3 study for their shingles vaccine containing our proprietary adjuvant. This 16,700 patient Phase 3 study showed a remarkable 97% reduction in the risk of shingles for adults ages 50 and over compared to placebo. This unprecedented outcome further validates our QS-21 adjuvant which is also a component of GSK's RTSS malaria vaccine as I mentioned earlier.

The GSK QS-21 containing malaria vaccine is the very first malaria vaccine to show efficacy in a Phase 3 study. It is currently under review by EMA for regulatory approval and we expect a decision from EMA as early as this year. As you may know, GSK is now the number one ranked faxing company in the world in terms of revenues.

These two late stage vaccine programs could provide us with annual royalty payments that could be a significant source of non-dilutive funds for advancing our internal programs. In addition to these two programs, there are additional clinical stage QS-21 containing vaccine programs under development by our partners.

As you have heard, 2014 was a very productive year for us and we are off to a great start this year. We look forward to keeping you updated on our continued progress.

With that I would like to turn the call now over to Dr. Stein, our Chief Scientific Officer, for additional comments and details. Bob?

Thank you, Garo. I too am very pleased with our progress at Agenus since I joined in January of 2014. As Garo mentioned, we started this year by launching a major global oncology alliance with Incyte built on our checkpoint modulating antibody programs. As many of you know, checkpoints are a system of regulatory receptors and ligands expressed on various cells of the immune system and sometimes on tumor cells. Checkpoint processes function as a kind of thermostat for the immune system, stimulating rapid generation of immunity to combat infectious organisms but also down regulating the immune response when appropriate in order to limit the possible damage to otherwise normal tissues.

In the last five years, major advances in cancer therapy have arisen from a growing appreciation of the roles of checkpoints and the body's responses to cancer. Antibodies targeting checkpoint receptors are their ligands. Checkpoint modulators, or CPMs for short, such as Bristol-Myers Squibb's anti-CTLA4 antibody YERVOY or Merck's recently approved anti-PD1 antibody, Keytruda, allow oncologists to unleash the power of the immune system to seek out and destroy cancer cells.

In some settings the benefit to patients of the use of CPMs to treat cancer have been truly spectacular, such as in the treatment of metastatic melanomas with CPMs that block CTLA4 and PD1. We are learning that combining CPMs can produce compelling efficacy but also can trigger significant immune mediated side effects. The key to the best future treatments will likely be the use of various CPMs such as those in Agenus' portfolio in optimized combinations that are tailored to the needs of each patient. With our broad portfolio of checkpoint modulators, we have the opportunity to systematically test rational novel CPM combinations.

A key advantage to the alliance with Incyte is that it affords us the opportunity to combine our checkpoint modulator antibodies with small molecule immune modulators in the Incyte portfolio such as their ideal one inhibitor, Incyte 360.

There is also the potential for combining CPMs with immune educating vaccines like the Agenus' Prophage which could potentially improve outcomes by safely directing the patient's immune system more specifically to the tumor and with less collateral damage to normal tissues as a result.

We have made significant progress over the past year in moving our CPM programs towards IND filings. We expect to file the first two INDs this year followed by two or more additional INDs next year. We have also made significant progress in our Merck collaboration towards our collaborative goal of discovering antibodies against two undisclosed Merck checkpoint targets which are distinct from our own checkpoint modulating programs.

Beyond these two collaborations, we continue to leverage our Retrocyte display platform to generate more antibodies against new checkpoint targets for further development.

Next I would like to provide you with a brief update on Prophage. In July 2014, we reported encouraging results from a single arm open label Phase 2 study of our cancer vaccine, Prophage, in patients with newly diagnosed glioblastoma multiforme.

Prophage is an autologous cancer vaccine prepared from each patient's own surgically resected tumor. Therefore it is a highly individualized patient specific form of treatment recognizing that each patient's tumor has its own unique set of mutations and potential triggers for immune bracket mission and destruction.

In this study, Prophage treated patients with GBM demonstrated a median overall survival of approximately 24 months compared with an historical expected survival of about 16 months in comparable patients. In addition, vaccine treated patients had a median progression free survival of nearly 18 months, approximately two to three times longer than patients historically treated with the standard of care which is surgical resection, radiation and temozolomide. At the time that the study was reported, an impressive 22% of the patients remained alive and progression free at two years.

We anticipate submitting the full data from this study for publication in a peer-reviewed journal. As previously stated, we have completed an end of Phase 2 meeting with the FDA and we are exploring options to advance Prophage into a registration study.

Last summer we also reported positive data for a Phase 2 study testing HerpV, an example of our HSP-70 or heat shock protein 70-based peptide vaccines in the treatment of adult general herpes. We believe this trial shows that our heat shock protein 70 synthetic peptide vaccine platform can safely produce good cellular and humoral immune responses and supports its potential promise for additional uses in cancer and infectious diseases.

Finally as Garo mentioned, our partner, GSK, a global leader in vaccines, announced last summer that their RTSS malaria vaccine was under regulatory review by the EMA. This vaccine candidate contains our proprietary adjuvant QS-21 Stimulon and we expect a regulatory decision later this year. As Garo mentioned, this is the first malaria vaccine candidate ever to have produced positive Phase 3 results and to have been submitted for regulatory review.

In December 2014, GSK announced that their

prophylactic shingles vaccine had achieved an unprecedented 97% rate of protection at roughly four years in a Phase 3 trial involving over 16,000 adults age 50 and older. This vaccine also contains Agenus' QS-21 Stimulon adjuvant. We believe that this vaccine has the potential to substantially expand the market opportunity in shingles. Beyond its unprecedented 97% efficacy rate which dramatically exceeds the reported 50% to 70% protection rate at one year of the only shingles vaccine currently on the market, other potential advantages include the fact that GSK's vaccine is a subunit vaccine and not a live attenuated viral vaccine and can be shipped at refrigerated rather than frozen temperatures.

Agenus is eligible to receive single-digit royalties as well as undisclosed milestone payments from any future product sales of these vaccines containing our proprietary QS-21 Stimulon adjuvant.

Thank you for your attention. I would now like to turn the discussion back over to Gary.

Thank you, Bob. We look forward to providing you with continued updates on our progress on the advancement of our CPM programs and vaccine pipeline and our ongoing collaboration with Incyte, Merck and GSK. We remain committed to developing the next generation of immunological therapies for the treatment of cancer and we thank you for your continued support.

With that I will now once again turn the call back to Christine.

Thank you, Garo. Valerie, you can now open the call for questions.

(Operator Instructions). Robert LeBoyer, Maxim Group.

Good morning and congratulations on a nice quarter. My question has to do with the European regulatory action on the malaria vaccine and is there any better timeframe other than just this year or can you -- just remind us as to when the filing was made? Thanks.

The filing was accepted, the filing was made in July but it was accepted in late July or early August I believe for review. Typically the agency should take the prescribed amount of time for the review which should be about a year give and take. Given the high-profile nature of this vaccine, which as Dr. Stein alluded to, could save hundreds of thousands of lives of children in Africa, we would expect expeditious action.

Now once the European Agency approves the product, then the product needs to go through the individual country bureaucracies in Africa for commercialization and the timelines for that will be a little bit longer beyond this year. But we hope that based on the preferences of these individual countries and the sense of urgency provided by not just GlaxoSmithKline, by the World Health Organization as well as the Gates Foundation, our hope is that this vaccine will get to the children in Africa as quickly as possible.

Bob, would you like to add anything to that?

Just one thing for perspective. There are almost 900,000 deaths a year from malaria in Africa and 70% of those are in kids under the age of five years. This vaccine reduces the incidence of malarial infection by 50%. So there is over 2000 kids dying every day from malaria in Africa and this could prevent 1000 deaths a day. So it is important question about when it will get approved and when it will get distributed.

Okay, thank you.

Reni Benjamin, HC Wainwright.

Good morning, guys, and thanks for taking the questions. I guess starting off with the vaccine, the shingles vaccine. I probably heard it wrong, I thought you had mentioned that it is under review at the EMEA but that is probably be malaria vaccine. Can you just give us an update when we will see the filings for the shingles vaccine take place and when you think it could be in the market?

As you know, this is GlaxoSmithKline's vaccine and we are not at liberty to make disclosures on their claims. So however we are in constant contact with them and the moment they make the proclamation as to when the product will be filed which we hope will be in an expedited timeline given the high level of efficacy, we will let you know. But at this point we don't know the answer to that question and if we did, we would still have to wait for their public disclosure about the timeline.

Suffice it to say, there's only one vaccine available right now. That is by Merck and the efficacy differential between this vaccine which is 97.2%, nearly 100%, versus the other vaccine which is in the range of 50% to 70% depending on the age group and depending on how many years after the vaccination we are looking at protection, we believe not only will the GlaxoSmithKline vaccine with its much higher efficacy rate would be the standard but we also believe that it will have the opportunity to expand the market very significantly.

Can you talk, I know Bob kind of touched upon some of the other competitive advantages including this being a subunit vaccine but can you talk a little bit about what sort of sales Zostavax has already seen and any other competitive advantages outside of efficacy that you believe might be important in marketing the product?

Sure. Bob?

So Zostavax is a very significant product. It does reasonable protection if you are between 50 and 59 after -- for the first year after vaccination, you have about 70% reduced chance of getting shingles. But out of four years, it is only 50% in that age range and if you are above 60, the one-year point is only 50% protection. So this GSK vaccine at 3.5 to 4 years gave 97% for greater protection, 97.2% protection.

The other piece of it is that it is not a live attenuated virus the way the Zostavax is. So Zostavax has an issue in that if you are immunocompromised it can disseminate. If you get it and you are immunocompetent and then you become immunocompromised, it can reactivate and actually produce its own form of shingles. It can be transmitted from a vaccinated person to an immunocompromised contact and it is not a good thing to have around if you are pregnant. Despite all of that, it is a $750 million a year product.

The amazing thing about the GSK vaccine that was given in conjunction with QS-21 Stimulon is that with a single subunit like a protein E, they have been able to achieve very powerful and lasting protection. Now shingles itself is a painful experience and it is no fun but a lot of us will end up getting it if we aren't vaccinated. But even that happens, about one in four to five people will get it if they live to be 80 years old.

But the other piece is this, that about one-third of those people get what is called postherpetic neuralgia which is a terribly painful chronic condition in the region where your shingles had occurred. And so the advantages that the subunit vaccine has none of the concerns about immunocompromised, reactivation or transmission and it is also easier to ship and distribute because you are not dealing with a live attenuated virus that you have to keep viable.

So my belief is that as soon as this vaccine becomes approved, I'm going to go out and get it being over 50 at this point. I think it is a very significant future product. Of course that is my opinion and doesn't reflect anything that GSK would say officially but I think it is a very powerful advance.

Got it. Just switching gears now to the CPM programs. One having to do with the timing of the recognition of the upfront, are we expecting from a housekeeping perspective the entire upfront to be recognized in the first quarter? I think by March 1 is when you are supposed to get it but just want to know if this is something that gets amortized over the life of the collaboration or you will see that lump sum in the income statement?

Yes, so we have received the cash since year end, that was the $60 million mentioned in the opening remarks and it will be amortized over the period of the agreement.

Which is, about how many years?

It will be amortized in the range of about three to five years.

Excellent, okay. And then regarding the two INDs that would be submitted this year and the two INDs next year, can you give us any more color as to which particular targets that might be and how that development is coming along. Are they all in IND enabling studies or soon to be?

Everything that we have described is in IND enabling studies. We are very conscientious about pushing those forward aggressively and appropriately. We have all the programs are moving forward on track and we will make those filings on time. But we are not going to disclose at this point which of our products will go in what order. It is in part because it is our own information, it has some competitive positioning aspects and also because now some of that is with our partner Incyte, so we have a concerted communication policy there.

Fair enough. Is the Merck undisclosed targets in IND enabling studies as well?

That is for Merck to disclose. They are usually pretty closed mouth about things like that but that program is going along well.

Very nice. And just one last question. The QS-21 call it platform, what is the latest count as to the number of partners that are on board evaluating QS-21 and what is the latest number of call it most advanced clinical trials that are currently ongoing?

The most advanced programs are obviously in the hands of GSK and as you know, we also have a clinical program with J&J in Phase 2. Most of the rest of QS-21 [varying] programs are with academic centers. There are a significant number of programs around the country and around the world in the hands of our clinicians that advance their own trials on their own dime basically. But suffice it to say as Bob has alluded to, this is an adjuvant that is extensively studied in well over 50,000 patients right now. And so the safety is not a consideration anymore obviously particularly given the fact that it is now the subject of a vaccine to be used in children including infants. And we believe, it is our belief that QS-21 is one of the major drivers of efficacy in the two vaccine candidates that are right now in advanced stages of development and review. So that I think sums it up.

Thanks very much. Good luck in 2015.

George Zavoico, JonesTrading.

Good morning. A couple of questions. First one about the Retrocyte display technology and your ability to rapidly discover and optimize antibody candidates. Correct me if I am wrong but it has been applied mainly just to your candidates. How do you intend to leverage that given the commodity that antibody discovery now is considering that Sorrento, MorphoSys and others have antibody discovery platforms as well? How do you intend to leverage that into partnerships or collaborations?

One thing before Bob delves into the details of this, as you know, we have disclosed some information about our Retrocyte display platform. And just to correct what you said, it isn't just for our own antibodies. For example, Merck came to us with their own target and this is the source of discovery for antibodies for that.

There is a lot of confidential development within our Company, advancements that we don't want to specifically elaborate on. But I think Bob could give you a little sense of the direction the field is giving going at and what our competitive advantage could be.

I think it is a good question, George, and you are right that to some extent antibody discovery is practiced in a variety of different ways. Some of the other competing technologies produce very reasonable antibodies and sometimes they hit snags in being developable because of levels of expression or other pharmaceutical properties that are less attractive.

Our technology is very nice in that it doesn't require immunization but it doesn't lead us down a bunch of blind alleys. We get antibodies out of it that are already well expressed on the surface of [1 million] B lymphocytes and therefore are pretty well behaved when we take them forward as potential development candidates.

We have since the acquisition of 4-Antibody, continue to improve on the platform and we are in the midst of building out what I think will be a world-class development and discovery organization focused on producing top-quality antibodies. We are leveraging that with our Incyte partnership right now. It is not only the programs that we have but additional future programs we are contemplating with our partner.

As we move forward, if we have additional bandwidth we may elect to partner more broadly for other targets outside of immuno-oncology related to flipside pharmacodynamics in the checkpoint space and there are number of other opportunities that we are discussing with outside parties that I guess the best I can say is stay tuned.

George, just to make one correction, even though the perception is of anybody's discovery platforms being a commodity, that is a perception, there are very important unique nuances that not only are as Bob said our platform has but that we are advancing our platform's capabilities to do other things that will even make us more unique.

There is clearly a reason why Merck came to us as opposed to going to others for the discovery of antibodies for their target and that speaks to I think some of the unique attributes of what we have.

By commodity, I didn't mean that every platform was the same. Each one clearly has certain advantages and probably some cost advantages too. So, Bob, thank you for eliminating the advantages of the Retrocyte display.

I will stay tuned. I expect this most likely will be leveraged into some new announcements this year, if not this year then next year. But for the meanwhile between Merck and Incyte, it seems you guys are pretty busy with optimizing it and getting it to work for your first two partnership collaborations in that regard.

George, just one other point. We do have a use of Retrocyte Display and we think it has great characteristics. It however is a tool and not a religion and we are open to and do employ whatever is going to work the best in every particular setting. So we are looking at the merged approaches from different perspectives for making best-in-class antibodies cost effectively and quickly.

Okay, great. And second question is, you mentioned, Bob, all the options you have for combining your CPMs and optimized combos, not only between differentiated CPMs or different CPMs, you mentioned Incyte's and with your vaccines. There is a lot of choices here and a lot of options and you could do dozens of studies. And a lot of these are going to be personalized. I mention they would have to be regarding which checkpoints are expressed by which cancers and which patients.

So in that regard, do you have a biomarker discovery platform or are you working with anybody in that regard to try and narrow down the inclusion criteria and which combinations to go forward with?

I think that you are making a very important point and part of the way the entire field is moving is to understand that to optimize treatment, you will want to have a better appreciation of the detailed pathobiology in each patient which will require not so much the type of biomarker where you measure one thing as a sophisticated immuno-monitoring capability both for patient stratification and for deciding what the implications are about potential therapeutic interventions, to track whether those interventions are having the pharmacodynamic effect you intend them to have. And then to make better predictions about whether the changes you observe indicate that the patient is on the way to benefit or not.

We have built out in increasingly high quality our translational capabilities. The Company as you can imagine has been in the immuno-oncology space and vaccine space and working to understand the interaction between the immune system and cancer for two decades. So this has been a really deep focus of the Company and it is one of the things I think advantages us in the movement into the checkpoint space. There is a long and deep appreciation of the underlying pathobiology.

So I think it is going to be absolutely crucial and we will certainly use that to help design and focus our early development explorations on the things where we think we have the best chance of matching up the patients' needs with our therapeutic interventions and combinations.

That is great and exceedingly important given Obama's recent initiative. And I don't know if you saw the New York Times today, they had a story about going into personalized cancer medicine in a couple of examples. So it is getting a lot of -- a lot more press more broadly into the lay public. So that is great that you are going in that direction.

Okay, thank you very much.

There are no further questions at this time. Please continue.

Thank you, Valerie. I would like to remind listeners that a replay of this call will be available approximately two hours after the call and that the call will also be accessible from the Company's website at www.Agenusbio.com.

On behalf of the Agenus management team at Agenus, I would like to thank everyone for joining us on today's call. We will be available to receive any further inquiries following the conclusion of this call.

With that, Valerie, please conclude the call.

Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.