Agenus Inc (AGEN) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Agenus second-quarter 2015 earnings conference call. As a reminder today's conference is being recorded. At this time I would like to turn the conference over to Evan Ballantyne, Chief Financial Officer. Please go ahead, sir.

Thank you, and welcome to the Agenus conference call to discuss our second-quarter 2015 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 potential applications of the Company's technologies and product candidates for 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 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 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, Garo will provide a corporate update and I will review our financial results, and Bob will provide an update on our research and development activities. We will then open up the call for questions.

With that, let me turn the call over to Garo. Garo?

Thank you, Evan, and thank you all for joining us this morning. Evan joined Agenus as our CFO in recently just in June. He brings more than 30 years of financial and operations experience to Agenus and will lead our financial, accounting, and commercialization function -- I'm sorry and communications functions among some other of course. We are very [full] pleased to welcome him to our senior management team.

I'm also delighted to report that the first half of 2015 was a period of important progress for Agenus. In the past few months, we have continued to build on the momentum from the first quarter. More specifically, we consummated additional strategic transactions that expand our immuno-oncology portfolio.

We had key data publications and presentations highlighting the value of our partner and proprietary clinical stage programs. We built our team across the board, and also our executive team with the addition of Evan Ballantyne as CFO, as I just mentioned.

We strengthened our balance sheet to be in line for corporate objectives and we are well positioned to advance our programs and partnerships towards key milestones this year.

One of our key focus areas continues to be alliances and acquisitions that further strengthen our capabilities across the board with the potential to create best in class combination therapies for cancer.

As you know, in January of this year we announced a global hematology oncology alliance with Incyte which combines Incyte's track record of success in drug discovery, development, and commercialization with our expertise in immuno-oncology biologics. The Incyte partnership builds on our experience with checkpoint modulating antibodies and is initially focused on four key immune check point targets: GITR, OX40, TIM-3 and LAG-3.

In April, we acquired from Celexion, the SECANT use display platform for the generation of fully human monoclonal antibodies. This further optimizes our antibody discovery and development capabilities. The SECANT-based platform is highly complementary to our mammalian Retrocyte display platform and we can use the two systems together to complement each other and accelerate development of both our proprietary programs and our currently partnered programs with Merck and Incyte. We believe that our antibody generating technology is now amongst the best in vitro platforms in the industry with significant advantages in speed, efficiency, for the creation of high quality antibody candidates.

This week, we also announced the acquisition of Diatheva's anti-CEACAM1 monoclonal antibodies. This acquisition expands on and complements our existing extensive portfolio of immunotherapeutic programs. You will hear from Dr. Robert Stein how antibodies targeting CEACAM1 may be effective as single agent therapeutics as well as in combination with other therapeutics antibodies that we have in our portfolio including those that we have partnered with Incyte.

We also extended our oncology collaboration with Merck for an additional year. During the second quarter, our academic collaborations at Northwestern University presented updated survival data for the Phase 2 study of our Prophage vaccine in newly diagnosed glioblastoma multiforme which is known as GBM. The data presented at the ASCO meeting were impressive, demonstrating that patients receiving Prophage in addition to the standard of care had significantly longer progression-free survival and overall survival compared to historical data for the standard of care treatment alone.

Dr. Bob Stein will elaborate on the details of these data in his comments in a bit.

We expect our academic collaborators at Northwestern to submit the full Phase 3 study results for Prophage to a leading peer-reviewed journal this year, and we believe that the data presented provide strong support for advancing Prophage into Phase 3 trials. Our target is for a Phase 3 trial to begin this year, and we have seen increased interest from potential partners in light of the more complete Phase 2 data presented at ASCO as well as data presented at ASCO on combination CPMs with vaccines.

Additionally, two publications during the second quarter highlighting positive data for vaccines from our partner GlaxoSmithKline incorporating our QS-21 Stimulon adjuvant were published. First, data from GSK's randomized Phase 3 study of HZ/su, which is a vaccine candidate for the prevention of shingles, were published in the New England Journal of Medicine.

GSK's HZ/su reduced the risk of shingles which is herpes zoster by 97.2% in adults aged 50 and older compared to placebo. This is a compelling result, obviously. This vaccine has the potential to essentially eradicate shingles, which is a very painful disease affecting a high proportion of adults with incidences increasing dramatically as we age.

Also, final results from GSK's positive Phase 3 study of their prophylactic malaria vaccine candidate RTS,S containing Agenus' QS-21 Stimulon adjuvant were published in Lancet. Significantly fewer cases of malaria were observed in children who receive our RTS,S followed by a booster shot at the 18-month period. More than 2,000 children die from malaria each day in Africa, each day. GSK has filed to register this potentially life-saving product with the European regulatory agency EMA, and we expect the decision in 2015.

These two publications highlight the clinical impact that QS-21 Stimulon brings to the vaccine world and to Agenus. We are eligible to receive a milestone payment upon GSK's first approval of QS-21 Stimulon containing product and royalty from QS-21 containing vaccine products for 10 years.

Finally, during the second quarter we completed a public offering adding approximately $75 million to our cash balance. This, along with additional resources we expect to have in place by year end, will provide the resources we need to execute on our R&D and corporate strategies and deliver on our objectives.

With that, I would like to turn the call back to Evan to review the financials for the quarter. Evan?

Thank you, Garo. I will now review our second-quarter 2015 financial results. For the second quarter ended June 30, 2015, Agenus reported a net loss attributable to common stockholders of $40.5 million or $0.53 per share based and diluted compared with a net loss attributable to common stockholders for the second quarter 2014 of $7.8 million or $0.12 per share basic and diluted.

For the six months ended June 30, 2015, the Company reported a net loss attributable to common stock shareholders of $89.3 million or $0.83 per share basic and diluted compared with a net loss attributable to common stock shareholders of $8.5 million or $0.15 per share basic and diluted for the six months ended June 30, 2014. Cash, and cash equivalents, and short-term investments were $139.6 million as of June 30, 2015.

As Garo mentioned, this reflects net proceeds of approximately $74.6 million from our recent offering of common stock. The increase in net loss attributable to common stock shareholders for the six months ended June 30, 2015, compared to a net loss attributable to common stock shareholders for the same period in 2014, and was primarily due to the advancement of checkpoint modulator programs, the $20.7 million non-cash expense from the fair value adjustments of contingent obligations, and the $13.2 million charge for the purchase of the SECANT yeast display platform in 2015. During the same period in 2014 the Company reported non-cash, nonoperating income of $11 million related to the fair value adjustments of a contingent obligation.

This concludes the financial proportion of the call. I will now turn the call over to Dr. Robert Stein for a review of the scientific and clinical progress during the quarter. Bob?

Thank you, Evan. We continue to make good progress with our proprietary and targeted programs including our collaborations with Merck and Incyte. In addition to moving our six publicly disclosed checkpoint modulator programs forward on schedule, we are making solid progress on five additional proprietary checkpoint modulatory programs, the targets of which we have not yet publicly disclosed.

Earlier this month, we further strengthened our immunomodulatory antibody portfolio by acquiring rights to antibodies targeting carcinoembryonic antigen cell adhesion molecule 1 or CEACAM1, an immunomodulatory glycoprotein expressed on the surface of T-cells, NK cells, and interestingly on the surface of many tumors. CEACAM1 has been shown in preclinical studies to suppress both innate and adaptive immune responses to cancers. CEACAM1 is over expressed on a number of human cancers including melanoma and cancers of the bladder, lung, colon, pancreas, and stomach. Antibodies targeting CEACAM1 should reverse immunosuppression and have potential as monotherapies and also in combination regimens with of the checkpoint modulators such as PD-1 antagonists or GITR agonists.

Agenus' CEACAM1 antibody program is a natural fit with our existing portfolio of CPMs, and we will integrate this program into our ongoing efforts to create best-in-class combination therapies for patients with cancer.

Other checkpoint modulator collaborations are progressing nicely, as Garo noted, we announced a continuation and an extension of our research and development activities with Merck. This extension reflects a considerable progress we have made together and our shared goal discovering antibodies against two undisclosed Merck checkpoint targets for use in cancer treatments. These checkpoint targets are distinct from our own checkpoint modulating programs. We look forward to continuing our productive collaboration with Merck in this area.

We are also making excellent progress in collaboration with Incyte. We are on track with our plan to file our first two checkpoint modulator INDs this year, one partnered with Incyte and one for a proprietary Agenus program. These filings are planned to be followed by two or more additional INDs next year. We plan to advance our first checkpoint modulators into the clinic in early 2016.

A key highlight is the quarter with the updated Phase 2 Prophage data in glioblastoma multiforme. Dr. Orin Bloch from the Feinberg School of Medicine at Northwestern University, who was the senior investigator on the Phase 2 study of Prophage in glioblastoma, discussed the data in an oral presentation at ASCO. Treatment of patients with newly diagnosed glioblastoma multiforme with Prophage added to standard of care showed significantly longer progression free survival and median overall survival compared to historical data for patients receiving standard of care alone.

An important finding in this study is that patients with less elevated PD-L1 one levels of baseline on the peripheral blood monocytes showed markedly better median PFS and median overall survival than observed historically with standard of care.

Specifically, we saw a median progression-free survival of 27 months in these patients which are half the patients in the population versus five to nine months for historical data and a median overall survival 45 months versus 15 to 19 months for historical data.

Most encouragingly, more than a third of these patients remain alive for more than three years from initial treatment and more than 80% of these had not progressed.

We also saw improvement in median progression-free survival and median overall survival among patients with greater monocytes PD-L1 elevation at baseline, although the differences in this were less pronounced than in the patients with less elevated baseline levels of monocyte PD-L1. These results suggest that Prophage may improve outcome when added to standard of care in those patients with less elevated baseline levels of PD-L1 on their monocytes. And furthermore, they suggested by combining Prophage and standard of care with checkpoint modulators that block PD-1 or PD-L1, these improved outcomes might be extended to those patients with higher baseline levels of monocyte PD-L1.

Additionally, the reported data suggests that Prophage plus standard of care is associated with longer PFS and median overall survival compared to historical data with this standard care alone regardless of methylation of the MGMT promoter, which is a known predictor for response to standard of care. Although the apparent benefit of adding Prophage to standard of care was observable in all subgroups of patients compared to historical outcomes, the prolongation of median progression-free survival and median overall survival are especially striking in patients with high PD-L1 and methylated MGMT -- I'm sorry, low PD-L1 and methylated MGMT.

These results support our long-standing view that patient-specific vaccine approaches like Prophage will have an important place in the treatment of cancer, both as monotherapy and in combination with checkpoint modulators. We continue to evaluate opportunities to advance Prophage into a well designed controlled Phase 3 trial in newly diagnosed glioblastoma multiforme later this year.

Thank you for your attention. I'd now like to turn the call back over to Garo.

Thank you, Bob. We are clearly excited by the advances that we've made in the first half of this year. We look forward to providing additional updates on our activities and expected milestones for the rest of 2015 as well as continuing relationships with our partners and any new collaborative opportunities that will arise.

We remain committed to developing the next generation of immunological therapies for the treatment of cancer and other diseases. We thank you for your continued support, and with that, operator you now can open the call with questions.

(Operator Instructions) Christopher Marai, Oppenheimer.

Thanks for taking the questions. First, I wanted to welcome and give my congratulations Evan. Great team. A few questions really regarding your recent acquisition of the CEACAM1 product. I know sales milestones, royalties weren't disclosed in the last press release. I was just wondering if you could provide any more clarity on obviously upfront type of milestone, a range there. And potentially ranges on the royalties as well as later sales milestones. Thanks.

Thank you, Chris. At this point, we are not at liberty to provide any of these details mutual agreements from the parties that we acquired, but they are pretty close to industry standards. Nothing remarkable. I think it's fair to them and it's fair to us, if you will. Importantly, as Bob alluded to, this is a target where we expect to see additional exciting developments as we go forward. It is a target that has been looked at, and I think it will be reasonable to expect additional validation, if you will, by players in the field of this specific target as we go forward.

Okay, great, thanks. That's helpful. And then just regarding those other players in the field and work being done there. I mean, how does this compare to other CEACAM1 molecules and other CEACAM targeted molecules out there, either in the clinic or preclinically? I know there's a few other players looking at this and just wondering why you decided to choose the molecule and the partner you did, and if there are any other aspects of the partnership. For instance, if it's a sort of standard antibody, have you modified the Fc region, kind of [classification], or have you looked at potential by specificity? Thanks.

Sure, one question -- I mean, one remark and then I'll turn it to Bob. Obviously, we have been quite aggressive with our antennas up, if you will, to look at opportunities in this field. We expect the field to get increasingly competitive, and we zeroed in on an opportunity that Bob will elucidate on that we think is going to be quite competitive in the field. And we believe it's the best opportunity that we could get our arms around right now, perhaps not the lead product in terms of being advanced to the clinic but pretty close behind it, if you will.

I think it's a good question, Chris. We have quite a bit of interest in the target. The preclinical and correlative clinical biology and pathobiology are very convincing. We were looking at various options and the antibodies that Diatheva had created have the necessary functional properties that we're seeking. We have the ability to fine-tune them with the platform we have to make truly excellent development candidates, and we think this will move us down the road quite a bit.

This is an area that's just coming into interest amongst other players. There's one antibody out in front that has gone into the clinic but it's a very early point in the recognition of this as a high-quality target.

Great, thank you.

Swayampakula Ramakanth, HC Wainwright

Thank you, good morning, Garo, Evan, and Dr. Stein. A couple of questions, one financials and one on the strategy. In terms of strategy, what kind of -- or science, what steps are still to be completed before we can get the Phase 3 started with Prophage in the newly diagnosed brain cancer?

So, I think this is just one of the areas of inquiry I think. More specifically, we have made the statement that we expect to start a Phase 3 trial with Prophage and that we expect to do this with funding that will come either through a partner or a third-party, specifically for this program.

And I think that is the intent and we have set an objective of completing such a transaction by the end of the year, and perhaps we will do this little bit earlier but it is on track.

Okay, and then on the financials part of it. When we look at the second-quarter financials, we see that the operating expenses are raised mostly because of the non-cash part of it but I'm trying to understand what's the real expenses and what's the non-cash expenses there. And how should we think about this, because I think I'm trying to understand how the cash and the stock our considerations that are put up for the SECANT acquisition?

It's Evan here. I can probably give you some inside into cash burn. Net cash from operating activities for the Company for the six months ended June 30 was approximately $9.6 million. If you take out the revenue or the revenues associated with the Incyte deal and add back the milestones from the 4-AB, you come up with a cash burn for the six months ended June 30, 2015, of approximately $23.6 million or about $4 million quarter. I don't know if that's helpful.

$4 million a month, sorry.

And that's very much on target with the guidance that we provided before. Even before there was Evan that's the guidance we provided. Thank you, Evan.

Thank you, I'll step back and get back in the queue.

Arlinda Lee, MLV.

So on the glioblastoma, Garo, you mentioned that you had expected funding from a third-party to start the Phase 3. Does that mean that you will be doing a study more broadly in an all comers type of trial? And then maybe can you provide an update on GSK's regulatory plans? They said they were going to update something this year. Is that still on track for the HZ/su vaccine, thanks.

Okay so let me do the GSK part and Bob will elucidate little bit on the specifics of the kind of trial that were planning on doing for Prophage. As you know in their Research Day, GSK specifically said that they expect an EMA decision this year, and we very much anticipate that will happen. That's number one. And in terms of timing for malaria, after this decision by the EMA, there will be additional bodies that will have to provide their blessings. One of them is WHO and after that happens, which we expect to be happening expeditiously after the [MA] decision, then they need to go to individual countries in Africa and get clearance in those countries before they market the product. So now, I don't want to speculate necessarily but that process will take some time. That process will take some time. It won't be a quick process, and even though I believe that it should be a quick process because these children that are vulnerable will benefit a great deal from a product such as a vaccine such as this. But the best estimate right now is perhaps a product launch will not take place until early 2017.

In terms of shingles, shingles trial was quite definitive in terms of efficacy. Now GSK provided guidance in there, and unfortunately I cannot elucidate anymore than what they had provided. Provided guidance that they expect to file next year and get approval some time thereafter. So that's all we can say right now about shingles product.

Dr. Stein, if you can give us some guidance on Prophage and the kind of trials that we are anticipating?

Sure. Arlinda, it's a good question. Our plan is to take Prophage forward into a Phase 3 in newly diagnosed glioblastoma multiforme. We will measure the level of PD-L1 on the peripheral blood monocytes of patients when they enter the study and we will take an approach to stratification on that basis but we will take all comers with newly diagnosed glioblastoma at an acceptable level of resection, and the other criteria that we have for performance status, etc, because we need to have clarity about where the right cut off this for the level of elevation of PD-L1 that somewhat blunts the efficacy of the vaccine and the group that responds most robustly. So that won't take any longer to enroll that study because otherwise you would leave out people with the more elevated PD-L1. It does increase the expense but it improves chance of getting an appropriately characterized and registered product with the right guidance on how to use it and in which patients.

Okay, great. Just a follow-up on the PD-L1 measures. Are you going to use a commercially available measure, or are you going to develop a companion diagnostic as well? Thanks.

It is a very important question, and that's one of the things we're working very hard to make sure that we have nailed it down and that will be a requirement before we can launch a study. The good news is that there are several assays already created in well-established central laboratories that are CLIA certified and have been used in support of clinical trials. We're leaning toward one of those but we have two that we're looking at right now.

Thank you.

Sure, thanks for the questions.

Gabrielle Zhou, Maxim Group.

Thank you for taking my question. So my question is more on checkpoints. In terms of checkpoint antibodies, Agenus appears to have the largest collection of antibodies certainly now with CEACAM1 antibody. So people always like to talk about PD-1, PD-L1 and CTL-4. Can you talk a little bit more about what types of tumors that express targets for checkpoint antibodies because they are very different from what people are typically used to here.

I think that's a very interesting question. Some of our targets like CEACAM1 are express broadly on a number of tumor types. CEACAM1 is sort of interesting. It has two splice variants, one of which has an internal inhibitory signaling capability; the other is just expressed on the surface of tumors as ligands. And the interaction between CEACAM1 on the tumor, it actually binds to CEACAM1 on lymphocytes or on NK cells and that interaction shuts down the lymphocyte or the NK cell. So that is sort of an unusual type of interaction that's a homodimeric interaction. And the objective of the antibodies is to block that interaction. So that's one type and that is sort of unusual.

The PD-L1 obviously gets upregulated on a number of tumors. There are internal signal transduction pathways that lead to that and also the exposure to gamma interferon in the tumor which is one of the consequences for the onslaught of effector T-cells can upregulate PD-L1. So some tumors have upregulated PD-L1 at baseline. Almost certainly if you evoke an effective immune response against the tumor, you'll get PD-L1 upregulation, which is one of the reasons why PD-1 is pretty important component of regimens.

Now, it may be that you want to block PD-1, you might want to block PD-L1 or both because PD-1 has two ligands, PD-L1 and PD-L2, and PD-L1 has two receptors. So neither one of them completely blocks the pharmacology of the other, and there's actually some rationale for thinking about using PD-1 and PD-L1 interventions together.

It's becoming fairly clear that some tumors have a fairly heavy mutational burden and immune system has an easier time recognizing those, and if you encounter a patient who already has disseminated disease, it's probably because the tumor has figured out how do we evoke protective mechanisms and block its destruction. So those are the patients that respond the best combinations of CTLA-4 antagonism for priming in PD-1 blockade and that's what's been seen in things like smoking-induced lung cancer or the more mutationally enriched melanoma patients.

But we're thinking about that very carefully. A lot of the things we're targeting our either ways to provide additional signals to affect your T-cells that have been partially stimulated to the T-cell receptor. Things like GITR, OX40, and other programs we have that we haven't talked about. Some of them are portions of the pathobiology for exhaustion of T-cells, things like TIM-3 and LAG-3 and, again, other things we haven't talked about. That seems to add to the inhibitory signals that are received through P1. Interestingly, there are also reports that CEACAM1 and TIM-3 cooperate in shutting down lymphocyte function.

So there is a very complicated biology, we are working to be on the cutting edge of understanding that. I think we're making good progress there. And it's nice to have this suite of tools because we really can probe the biology preclinically and we can match that up effective translational approach in the clinic and rapidly progress towards optimized combinations.

Thank you. It's really helpful. Actually this question is from Jason Kolbert, and he's now traveling in Australia. So but thank you again for taking my question.

Thank you, Gabrielle.

George Zavoico, JonesTrading.

Evan, welcome to the group. Be fun to work with you again. The question, a follow-on to the last question about CEACAM1. Can you talk a little bit about the normal expression of this protein and what you might expect as what might be potential adverse events from off-target interactions?

Well, it's relatively cleanly expressed on cells of DNA and adaptive immune system. There, as I mentioned, are two forms of the molecule that are splice variants; one of which has an internal inhibitory domain. And interestingly, after NF-kappaB activations, the long form comes up on lymphocytes. And so, since GITR acts through the NF-kappaB pathway, one of the possible consequences of activation of GITR, either through the natural presentation of GITR ligand from antigen-presenting cells or from agonist antibodies, might be up regulation of the inhibitory CEACAM1 on lymphocytes.

So it's a natural thing to think about combining with our other products in the attempt to stabilize and propagate useful immune responses to tumor. It looks like it's going to be a pretty clean intervention from the preclinical data.

So it sounds like it's the natural biological role is just like all of the other checkpoint inhibitors to temper the immune response so doesn't get so it doesn't get overblown and begin damaging normal bystander cells. Is that their effect?

I think that's exactly right, George. I think it's a portion of the dampening mechanism that prevents immune response overshoot and the tumors have cleverly figured out how to tap into that to avoid destruction.

And since you mentioned combining, looks like you're predicting it might combine with a GITR antibody. What about cumulative toxicities with some of the others like has been seen with Epi and the PD-1s. Any evidence that some combinations may not be effective or may cause toxicity?

Well, I think it's an important point. I think that that's not fully worked out yet and that will be part of our job is to make sure that we have as good an understanding of the potential combination of both efficacy and off-target side effects so that we can try to achieve high efficacy with an appropriate level of tolerable level of bystander tissue damage.

And in that regard come you mentioned that you might use your platforms to optimize antibody but I'm presuming you're not disclosing when you might be able to actually identify a new antibody candidate, because it's hard to predict how long that might take. Is that pretty much the case?

Presupposed correctly.

Okay. And final question. Regarding the antibody business, now you have two complementary platforms. You've got Merck and Incyte on board. Is part of your business plan to seek additional partners to use those platforms to find antibodies of interest perhaps even outside of cancer with other partners?

Well, we have focused very strongly on building world-class capabilities in antibody generation and optimization both for their binding characteristics and their cross-coupling to other downstream functions like the interactions with various Fc receptors either using natural or modified Fc fragments. We also have in the context of Mammalian Display system, we are able to select antibodies that are very well behaved pharmaceutically from the standpoint of expression levels, stability, lack of aggregation, germline, sequence, fully human germline sequence.

And so, there is an opportunity, so if we are putting all this together, to leverage it by working to find high-quality antibodies with partners. We're not interested in doing as a service function but we are interested in ways in which we can anticipate in upside creation to the application of what we worked so hard to make world-class.

Okay, so something a bit more accretive to your own objectives with regard to an antibody that you're developing rather than, as you say, a service function?

Yes.

Okay, great. Great, that's all for me. Thank you all very much. Look forward to the continuing progress.

(Operator Instructions) Larry Smith, SmithOnStocks.com.

Thank you for taking the question. I have a question on PD-L1 expression. I know that you don't have a large sample with newly diagnosed GBM or recurrent GBM. But based upon what you have seen and based on any other information, what you think the distribution is going to be from low to high expressed PD-L1. Do you think it's going to be highly skewed in populations toward high expression, or will it be a normal distribution? Do you have any sense of how that's going to work?

Yes, Larry, it's a good question. And so there are two aspects to it. What we measured in the study was the level of PD-L1 expression on peripheral blood white cells of the monocyte nature. And we also in the same patients received tumor-infiltrating macrophages where we could measure the same thing, what percentage of those cells were over expressed in PD-L1. And since the monocytes are the source for the tumor-infiltrating macrophages, it's reasonable that they are correlated, and they did turn out to be very correlated. If you were high in the peripheral blood on the monocytes, you were even higher in the tumor on the macrophages. So that suggested there's real biology that we're looking at.

And furthermore, we looked at the distribution of increased levels of expression in the patients that were sampled, which is 32 out of the 46 in the study. And the range is actually quite uniformly distributed and it isn't skewed.

Where we picked the cut off was the median. So half the patients are above this level and half the patients are below. So this is -- with that median as the cutoff, we can see a very clear suggestion that the addition of Prophage to standard of care has very observable benefit in the patients with the less elevated PD-L1.

And just to give you sort of a sense of it, normal [age natural] controls have about 5% to 10% of their monocytes expressing PD-L1 above what we'd consider a threshold level of activation. In these patients the range is between about 10% and 84% and 54% was median. So half or above 54% and half were below. So it appears to be a fairly evenly distributed parameter.

Thank you for -- I have another question just -- this is a question broadly on cancer vaccines. Bob, maybe this is incorrect but I seem to recall that when you came to Agenus that your enthusiasm for Prophage was not really high but it grew stronger and stronger as you got more data in. And that kind of corresponds to what the investment community attitude and perhaps the pharmaceutical industry's attitude is towards cancer vaccines.

Two or three years ago, I think very few people thought there was much prospect for them. Now, you're talking about the Phase 3 trial and we have a couple of -- we have some other situations where there's obviously a lot of investor interest and some pharmaceutical industry interest in cancer vaccines.

Could you walk us through what you think has happened over the last two or three years to the industry view of cancer vaccines and their potential to be a major treatment paradigm?

Yes, I think that's really astute observation and a very good question. Basically, you're right. When I came to Agenus 1.5 years ago, I was pretty skeptical about the prospect for the cancer vaccines, and I have to say that part of it was just because I wasn't really on top of all the underlying scientific rationale for Prophage. And I've now, as I've learned more and as the data have continue to evolved from studies that we've run, I believe that it's actually a very astute way into creating individualized cancer vaccines. It's also very clear that using next gen sequencing and analyzing the nature of tumor-infiltrating lymphocytes that the most important handles for the immune system to recognize cancer as abnormal are the individual mutations that have occurred as part of the peppering of the genome with mutations, either point mutations or frame shifts. And that those are the things for which you have the possibility for having still that high affinity T-cell receptors in your immune repertoire.

Some of the things that were considered promising like the testicular crypto antigens like MAGE-A3 or NY-ESO-1 [or prem], you do get ectopic expression in places that don't normally put those proteins into play. But the problem is that you probably gotten rid of all [IFN] T-cell receptors during thymic ontogeny, so you don't have the ability to really generate high affinity T-cells directed against those antigens.

So I think that there were two things. One is understanding that some patients have so much mutation in a tumor already that they have jumpstarted the immune system they don't absolutely need a vaccine. So it's hard to see a benefit in those. Some have so little mutational burden that they don't have enough difference from cells to be recognized by the immune system and eliminated that way.

So you really need to focus on the people with the median range of mutations with the potential to have in recognition but haven't gotten optimal activation in the system yet. So one part is figuring out in whom to apply these and what antigens to choose. I think that's progressed very well.

And then secondly, I think that the appreciation that you can have some effective activation in the immune system, the tumor has all these methods in short blocking that and that the checkpoint modulators have the chance to open up that avenue to the therapeutic benefit is a very big advance, and you can see that in spades with [prospect] plus CTLA-4.

The fact that CTLA-4 doesn't work by itself suggests that there isn't much turn on in the immune system and the fact that prospect works but works much better when you also add CTLA-4 blockade is a very example of what I've just been talking about.

I think that there is also much better understanding emerging about how to generate effective CD4 and CD8 responses to the need to have good Class II presentation as part of the vaccine process to generate lasting central memory in addition to just an effect or expansion in the beginning see could not only work to [debulk] tumor but to prevent resurgence of the tumor. I think it's an area where the understanding is advancing very rapidly, the tools for really analyzing and stratifying patients appropriately have blossomed over the last several years, and the convergence of the vaccine field in the checkpoint modulator field is going to be extremely powerful. And I think for people with anything less than smoking induced lung cancer or who have been baking in tanning beds for 10 years there's going to be a real need for this.

And then the last thing I'll say is even in the patients who have some level of jumpstart in the immune system already where just taking off the brakes with CTLA-4 or PD-1 gives pretty good efficacy. We know that the side effect profile in those patients is pretty high, and if you have a chance to sharpen and make more specific the immune response by vaccination, you may still be able to get to a similar efficacy in those patients with less spillover to collateral damage to other tissues.

So I think it's a very important area, and I think it is going to emerge as such over the next five years. And I think we're going to try to be in the lead in making that true.

Thank you. That was a very eloquent answer. If I could ask one other question, if I'm hearing you correctly, you're giving guidance that you're going to go into a Phase 3 trial with Prophage in newly diagnosed GBM, that you're going to rely on outside funding for that. That suggests to me that there is a high level of confidence on your part that you can find a partner. Am I reading that correctly?

Yes.

And what I would say is that there is certainly a lot of interest, especially in the wake of the prospect CTLA-4 results. And our strategic consideration is with our current cash we don't want to shortchange our CPM programs. But if our cash situation changes dramatically, we may decide differently with Prophage. It's a very high quality opportunity, and if you think about it as the end result of two decades' worth of investment of effort and money, and the fact that all the skids of grease including the release specs and the safety database that's been in over 1,000 patients worldwide, there's a considerable argument to be thought through about whether we fund it or partner it.

That's a choice. I mean you read the core comments correctly, Larry, that there is interest, significant interest, and the choice will be ours if we should go that way.

This is an opportunity where we can become a commercial company if we were to market it ourselves very quickly. It doesn't mean that we still cannot do this with a creative partnership setup, whether it is a financial partner and we retain all of the commercial rights or it's a commercial partner where we retain the rights at least for North America.

If I could just trouble you for one other question. Is it the case that the interest is intense from one or two companies or is it the case that there's broad interests across biopharma both big biotech and big pharma and perhaps even financial players to fund the trial?

I think it's all of the above.

Pretty amazing, thank you.

Thanks, Larry.

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

Hello, it's Evan Ballantyne again. I've been asked to reiterate our forward-looking statements comments. Including the fact that the Company has made forward-looking statements about potential income streams, research and development clinical trial activity, and the publication of data and potential application of the Company's technologies and product candidates for the prevention and treatment of disease. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Reference to these risks and uncertainties was 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 new Agenus's business and securities, investors should give careful consideration to the risks and uncertainties. And I'd like to thank the operator and everybody for attending the call. This conference will be replayed in its entirety approximately two hours on the Company's website at www.AgenusBio.com.

On behalf of the management team at Agenus, I would like to thank everybody for joining us on today's call. I will be available to receive any further inquiries following the conclusion of the call. And with that, operator, please conclude this call. Thank you.

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