ImmunoGen Inc (IMGN) 2003 Q1 法說會逐字稿

Welcome to the ImmunoGen First Quarter Fiscal Year 2003 Conference Call. Today's call is being recorded. With us today is the Chairman and Chief Executive Officer, Dr. Mitchel Sayare, and Vice President and Chief Financial Officer, Gregg Beloff. At this time I'd like to turn the conference over to Dr. Sayare. Please go ahead.

Thank you, and good afternoon. Thanks for joining us today, and welcome to ImmunoGen's conference call for our first quarter ended September 30. At 4:00 today we issued a press release that summarizes our first quarter 2003 financial results. I hope you've had the chance to review it. If not, it's available on our web site, immunogen.com.

At this time I'd like to remind you that during this call we'll cover material that involves forward-looking statements and that there are risks and uncertainties that may cause our actual results to differ materially from our expectations. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included on our web site and in our latest filings with the SEC.

Let me start with the topic that's on everyone's mind. What's happening in our negotiations with GlaxoSmithKline? Unfortunately, as I hope you understand, we can't talk about the content of the negotiations while they are still underway. I can assure you that we will announce the outcome when it's announceable. I can also assure you that we know that you would like these negotiations completed as soon as possible. What you might not know is that I would too. There is no percentage to keeping people in the dark and it's in no way in the company's best interest to do so. As soon as we know you'll know the outcome of these negotiations.

One question we get asked is why such negotiations take so long. The mental picture seems to be one of me and someone from GlaxoSmithKline haggling over financial terms. If only it were so simple. In reality, such negotiations extend well beyond a discussion of financial terms into broader areas related to the advancement of the product to the market. From the perspective of the large pharmaceutical companies, such negotiations involve people from many different functions within the company. And the people don't act monolithically. They can have very different points of view and spend a good deal of time just trying to reach agreement amongst themselves. That's why negotiations with big pharma are excruciatingly protracted, but be assured they will end and we will announce the outcome.

To update you on the Cantuzumab Mertansine clinical program, I am pleased to announce that the last patient has been enrolled in the final Phase I study. That study will end once that patient has received treatment and follow-up as specified by the study protocol. I also should add that clinicians familiar with the product's Phase I data all agree that the data support the advancement of Cantuzumab Mertansine into Phase II. This assessment is based on the full Phase I data set, which includes both the data presented and the findings from the additional patients who have been enrolled. As noted previously, other companies have expressed great interest, both solicited and unsolicited, in exploring Cantuzumab Mertansine as a licensing candidate.

Moving on to other products, the Phase I study with huN901-DM1, BB-10901 by other name, underway in the United States is nearing completion. We expect data from this study to be presented at the EORTC-NCI-AACR meeting being held in Frankfurt, Germany from November 19 to 22. The Phase II portion of the study will begin when its Phase I portion is complete. A Phase I study with huN901-DM1/BB-10901 is also underway in the United Kingdom.

We are delighted that Boehringer Ingelheim has advanced Bivatuzumab Mertansine into clinical trials. This is the first TAP product to enter clinical trials that was developed not by ImmunoGen, but by a company that licensed our technology to develop their own TAP product. As we go forward, we expect such partner products to contribute greatly to the body of data available on the TAP products. We are also delighted that this achievement by Boehringer Ingelheim was accompanied by a milestone payment to ImmunoGen.

In addition, Millennium continues to expect their TAP product candidate, MLN591DM1, to enter clinical trial in 2002. This is the TAP created by using our specific DM1 TAP effector molecule with their MLN591 antibody to prostate-specific membrane antigen, PSMA. So, four TAP products should be in clinical testing by the end of this year.

Behind these are other products in development, such as our huMy9-6-DM1 and IGF-1 receptor antibody, as well as candidates in development by our licensing partners. Our business model provides ImmunoGen with an inflow of cash and also with many potential roots to successful product development and commercialization.

I'd now like to turn the call over to Gregg to discuss our financial results for this quarter.

Thanks a lot, Mitch. About a half-hour ago, we announced our first quarter 2003 financial results. For the three-month period ended September 30, 2002, we reported a net loss of $3.2 million, or 8 cents per basic and diluted share, compared to a net loss of $1.6 million, or 4 cents per basic and diluted share, in the same quarter last year. Revenue for the three months ended September 30 was $2.3 million as compared to revenue of $1.4 million for the same period last year. Revenues for the first quarter, as Mitch mentioned, included a milestone payment of $1 million from Boehringer Ingleheim to ImmunoGen related to the commencement of clinical trials of Bivatuzumab Mertansine. Also included in revenues for this three-month period ended September 30, 2002, was $826,000.00 of clinical material reimbursements related to the manufacture of clinical material under certain collaborative agreements, and $480,000.00 of previously deferred revenue related to payments made pursuant to existing collaborative agreements.

Total operating expenses for the three-month period ended September 30, 2002 were $6.6 million as compared to $4.6 million in the same period last year. Included in total operating expenses for the three-month period ended September 30, 2002 was research and development expense totaling $4.1 million as compared to research and development expense of $2.5 million in the same period of last year. The increase in research and development expense in the quarter ended September 30, 2002 is primarily related to continued advancement of our TAP technology, support of our collaborators, and the strengthening of our research and development infrastructure.

I'm happy to report that we ended the quarter with a very strong cash position of $127.2 million. I am very comfortable with our cash position and I believe that we have the necessary financial resources to continue the successful development of our TAP technology. We continue to carry out our stated business model with the goal to offset cash burn with cash flow from our out-license collaborations. As you know, the Board has authorized our repurchase of up to 4.1 million shares of our common stock, and we will continue this ongoing share repurchase program. Through November 4, 2002, we purchased 1.4 million shares at a total cost of $4.4 million.

Now, before I turn the call back to Mitch, I'd like to spend a minute on fiscal year 2003 guidance. As you know, I stated on our last conference call that we would provide fiscal year 2003 financial guidance when we knew the outcome of the GlaxoSmithKline negotiations. While Mitch mentioned that these negotiations are still ongoing, we realize that you deserve an opportunity to learn what we expect our financial situation to be this year as things stand right now. So the financial guidance I will give you specifically excludes any costs or revenues associated with the Cantuzumab Mertansine product or the outcome of the GlaxoSmithKline negotiation.

Now, understanding that these numbers may change depending on the outcome of our negotiations with GlaxoSmithKline, I expect that we will incur a net loss of between $16 and $18 million for this fiscal year. I'd like to remind you that last year we incurred a net loss of $14.6 million. We plan for this to be a very productive year with respect to product advancement and collaborator support, and I feel comfortable that we have the cash position to achieve these goals. Mitch?

Thanks, Gregg. DeWayne, I think we're now ready to take some questions.

Very good. Today's question and answer session will be conducted electronically. If you'd like to ask a question you may do so by pressing the "*" key followed by the digit "1" on your touch-tone telephone. Once again, that is "*1" and if you are on a speakerphone, please be sure your "Mute" function is turned off to allow your signal to reach our equipment. We'll pause just a moment to assemble the question roster. And our first question will come from Brian Rye with Raymond James.

Good afternoon, guys.

Hi.

Hi, Brian.

Just a quick question. Now that we've [technical difficulty] experience in the clinic with Cantuzumab Mertansine, I was wondering if you all have any additional insight into what the clinical program might look like once you do get into Phase II. If it's going to be--first of all, I guess the dosing strategy, either dosing once a week or once every two or three weeks. And then also the potential indication that could serve as the lead indication, maybe gastric or pancreatic cancer, and just what your general thoughts are in that?

Well, there's a series of tumors that overexpress the C242 target to a great extent, and they include gastric, pancreatic, and a few others. And I think that our principal focus for the early portions of our Phase II studies will be on those diseases. The data all point to, you know, a great deal of interest in moving it forward as fast as we can. We haven't settled on the mode of administration, that is, whether it's once a week or more frequent or less frequent, quite yet. And when we do, and when we submit those protocols to the IRB's at various institutions, we'll let you know.

Sounds great. Thanks for the update.

Sure.

As a reminder, "*1" for a question. We'll next go to Jason Cantor with WR Hambrecht.

Hi, guys. Thanks for taking my call. I have a couple of questions. First, could you comment on the difference between your earnings statement, and I guess you burned through about $10 million in cash this quarter, so I'm just wondering what went into that? And also, if you might comment on any advances you've made in acquiring new targeted antibodies through any of your collaborations or internal development? Thanks.

Jason, this is Gregg. I'll be happy to address the first part of your question. You asked about cash, and I think that's a combination of a couple of things. As I mentioned, in our operating expenses we had research and development costs that are comprised primarily of the advancement of the TAP technology as well as to the support of our collaborators. And that also involves the strengthening of our R&D infrastructure. That's something that's very important to us here, and very important to the advancement of our technology. And we believe it will lead to more out-license deals. So, that's one component. The other component is that we are, as you know, actively pursuing a share repurchase program. And, as I mentioned, through November 4, we had purchased 1.4 million shares and that does come at a cost. So that will increase the reduction in cash quarter-to-quarter. Does that answer your question?

I guess. How much did you spend on CAPEX this quarter?

That will come out in the Q, which should be filed tomorrow.

Okay. Thanks. And could you mention, or address the question about antibody development?

Yes. I'll do that, Jason. We, as you know, we have a number of deals with third parties that bring antibodies in. Those antibodies then are tested by us both for specificity toward tissue as well as activity with DM1. And we are in the process of testing a number of those antibodies. The only ones, Jason, that we've spoken about are huMy9-6 and IGF-1 receptor. And so, we are just not ready yet, depending upon the outcome of our testing, and whether or not we actually take a license to those antibodies, to talk about them. What I can say is that we haven't yet taken a license to any of those antibodies from third parties.

Thanks.

Sure.

Our next question will come from Allen B. Fairfield, a private investor.

Hi, Mitch. How you doing?

Hi, Allen.

My question is can you characterize in any way the clinician's response or attitude going forward? Can you qualify it a little bit more? Is this a unanimous vote, high levels of enthusiasm?

I'm sorry, Allen. I was fielding another question from inside. Is what--?

--No problem. Can you underscore or qualify, even if it's somewhat subjective, the attitudes of the clinicians you mentioned--.

--Oh. Okay--.

--Going forward with the product, you know--.

--Yeah, of course.

--Thank you.

Of course. We had a series of private meetings with clinicians from around the country who specializes--who specialize in the diseases for which Cantuzumab Mertansine was prepared. And the unanimous position of everyone was an enthusiastic one, both because that the--that the side effect profile of the product is benign, but because--and because there is good evidence of biological activity, but also because there is such a desperate need for something that will work in those diseases. And yeah, I mean, there couldn't have been more support from the group of investigators that we met with.

Mitch, I've got to squeeze in another question if you'll allow it.

Sure.

Okay. You know, we talked about the science somewhat. From an internal forecast, looking at the science, looking at the markets, the different types of patients. Are you amending your business plan going forward? Your--in other words, just the business of applying C242-DM1 in the marketplace? Is the market larger, smaller? Does it need to be highly segmented by patient type and the fact that this drug may work better on others than some? Sorry to stutter there.

No problem. I don't think that--I think in all the times that I've discussed our strategy for going forward with Cantuzumab Mertansine that we've always described an approval approach that involved very specific discreet marketplaces. I mean, pancreatic has always been a target for our approval strategy. Gastric is a more recent addition because of what we believe will be very high activity in gastric cancer, and because of the desperate need for something in gastric cancer. But there is no question that the best approach to FDA is with a product in a discreet market in which your--in which your product shows maximal activity. That is unchanged. Regardless of what happens with GSK, that particular approach to approval strategy involving discreet marketplaces has been and will be in the future our approval strategy. There are lots of clinical trials you may do in addition to the specific ones for approval that will broaden the application of the product in the marketplace once it's approved. But generally speaking, the fastest approach is to do it in a small, desperately needed marketplace, and then broaden either on label or off label. And that's been our strategy all along and continues to be.

Okay. Thank you so much. I really appreciate it.

Sure.

And our next question will come from Patrick Flanigan with Adams Harkness.

Hi. I was just wondering, in terms of your guidance for fiscal '03 of a net loss of $16 to $18 million, how many new partnerships does that assume will occur over the next nine months?

Well, we haven't disclosed what our expectations are with regard to signing out-license deals. As you know, we talk to quite a lot of people and are actively involved in testing antibodies and conjugants for other people. But we're not prepared at this time to say what that represents from a quantitative standpoint.

Okay. And then, in terms of the last patient in the Cantuzumab study, can you just remind us, in terms of that study, how long it will take for that patient to complete the study?

Well, it depends on the--it depends on a number of things. The study is dosing the patient three times a week for three weeks with a one-week rest. The patient will get probably--unless they have some sort of negative reaction, the patient will get probably at least two cycles, so that's six weeks. And then, if the patient has any evidence of biological activity, or clinical benefit, rather, I think is the way that it's expressed, then the patient may be on the study longer. So it's a minimum of six weeks.

Okay. And, you know, obviously we're not privy to the discussions going on internally at Glaxo, but is it possible that Glaxo representatives would want to see the final data from this study before concluding what it should do going forward?

I don't have an answer to you on that. I just--I do not know the answer to that question.

Okay. Thank you.

No problem.

Our next question will come from Edward [Corrick], a private investor.

Good afternoon, Mitch. Thanks for taking my call.

No problem, Ed.

Two questions concerning or about 901. First is, who owns the IND for 901?

Well, that's a good question. I think we do. I'm sorry. I've been corrected. It was 50/50, and it turns out that British Biotech--that's right. British Biotech is conducting those clinical trials and they filed the IND, although we wrote the CMC section.

Okay. And that leads into my second question. And it comes about because it seems that BBIOY seems to have some internal issues right now and may be walking into a short flow of cash in the next year or so. Do you--.

--I was actually asked that question by another shareholder today--if I thought that, you know, British Biotech was going to go belly up, and if they do, what happens to N901. And--but I will be happy to answer that question after I hear your question, Ed.

Okay. And the question is this. Does ImmunoGen have a plan in place if BBIOY decides that they cannot bring N901 through Phase II in a timely manner or for any other reason?

Well, that's partly answered by the answer to the question that I raised, Ed. In almost any agreement that you have with another company there is always a clause for what you do in the case of insolvency of one party or the other. And in almost all of these cases, the rights of the product go back to the originator if it's the other company that becomes insolvent. And that's certainly the case here, number one. So that's in the worst case where British Biotech would have some sort of, you know, disastrous bankruptcy. Also, built into virtually every deal that one, although not every deal that we've done, but in virtually every deal that we've done are hurdles. That is, that the other company has to achieve certain milestones by a certain period of time or else they breach the deal, in which case they have some period of time to cure the breach and then the product ultimately, if it's not cured, comes back to us. And that's the typical way that these deals are constructed and this one is no different.

Thank you very much, Mitch.

Sure.

As a reminder, that is "*1" for an initial question or follow-up. And we do have a follow-up from Jason Cantor with WR Hambrecht.

Hi. Thanks for taking my follow-up. I guess following the last question, could you comment on what your current capabilities are in terms of clinical development? And, you know, if you have any plans to expand on that infrastructure?

So, in other words, if the British Biotech product came back to us would we--.

--Or C242 or any of the--you know, what is your current capabilities and what--do you have plans to expand them?

Right. We have the capability to run a clinical trial through a CRA. We do--a CRO, rather. We do not have our own CRA's and have no plans on expanding a clinical program beyond that which is needed to control a contract research organization that would be conducting the clinical trial. So we feel comfortable with our capacity now. I mean, maybe we'd have to add a person or two. But I mean, we are not--we are not talking about a huge change in our infrastructure in order to take on a clinical trials program in one product or another, largely because we can off load the bulk of that to third parties. It would cost more, but it's, you know, it's certainly the way to do it from a virtual perspective and appeals to us because of--just because of that.

Could you comment on the strategic reason? I mean, you are focused in one therapeutic area, that's cancer. Wouldn't it make sense to have, you know, a dedicated clinical development group that was capable of bringing multiple products to--?

--Well, I guess my answer to the question, Jason, is been there, done that.

Okay.

We've been through that. We've taken that route in the early and mid-90's and it cost us an enormous amount of money. And from that experience we learned that we can exercise nearly as much control, and in fact, possibly even more control over a CRO by doing--by setting the structure of the agreement correctly. And I think that's the way that we'll do it. I'm just not comfortable with building infrastructure and the expense associated with it.

Terrific. Thanks.

Sure.

There are no further questions at this time. I'd like to turn the conference back to Dr. Sayare for closing remarks.

Thank you, DeWayne. And thank you everybody for listening. Those of you who are coming and attending our annual meeting next Tuesday, I look forward to seeing you and any questions we didn't get to today we'll be happy to take then. Thank you.