ImmunoGen Inc (IMGN) 2003 Q2 法說會逐字稿

Good day, everyone, and welcome to the ImmunoGen Second Quarter Fiscal Year 2003 conference call. Today's call is being recorded. With us today is the Chairman and CEO, Dr. Mitchel Sayare and the Vice President and CFO, Mr. Gregg Beloff. At this time, I would like to turn the conference over to Dr. Sayare. Please go ahead, Sir.

Thank you. Good afternoon. Thanks for joining us today and welcome to ImmunoGen's conference call for our second quarter ended December 31st. With me is Gregg Beloff, our Chief Financial Officer. At 4:00 this afternoon we issued a press release that summarizes our second quarter 2003 financial results. I hope you've all had a chance to review this release. If not, it's available on our website at immunogen.com. 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 website and in our latest filings with the SEC.

As you've no doubt seen, two weeks ago we announced that we've regained the rights to Cantuzumab Mertansine. We determined that it was not in the best interest of ImmunoGen to enter into a revised agreement with GlaxoSmithKline and we took back the product rights at no cost to ImmunoGen. We didn't pay to get the rights back, we don't owe GlaxoSmithKline any royalties in the future, and we don't need to refund any of the money that they already paid us.

You should know, and maybe you can tell, that we feel energized by this outcome. You may be wondering why this took seven months to achieve however. Although it might be tempting to simply say "shove-off" to a partner that wants to renegotiate an agreement, we had an obligation to put aside our emotions and determine which outcome was best for ImmunoGen -- to enter into a revised agreement with GlaxoSmithKline or to end the partnership. To make this decision required assessments of financial factors, timing and scientific considerations.

The evaluation of financial factors required that GlaxoSmithKline determine internally what terms were acceptable to them. This took time. Then, once we knew what they wanted, we had to determine what we could live with and whether they were willing to make concessions. Although we knew that we didn 't need to stay with GlaxoSmithKline -- after all, we'd received unsolicited inquiries about the product -- there were certain benefits to staying with them. For example, they were all set to go into Phase II without delay.

On the science side, we had GlaxoSmithKline present to us their clinical plans for Cantuzumab Mertansine and once that was done, we began a process of evaluation of the plans. As part of this process, we had a series of meetings with oncologists experienced in the development of anti-cancer agents to get their perspective on Cantuzumab Mertansine development. This process took time but it was an important decision for ImmunoGen and it needed to be done with appropriate diligence.

We are pleased to have this behind us and to now be focused on gaining a new partner. Our plans for is to partner Cantuzumab Mertansine with a company that is committed to oncology and knows how to develop and gain approval of novel anti-cancer products in the most expeditious manner.

After careful consideration, we recently decided that it would be in everybody's best interests for Cantuzumab Mertansine to enjoy a broad Phase II program that's initiated by that new marketing partner. There are many, many Phase II studies that could be done and a number of ways of doing them. We thought about this a lot and, as I said, engaged in dialogue with a number of oncology experts.

If you think about it, this agent could be tested against colon, pancreatic, gastric and/or non-small cell lung cancer in single agent studies and in patients at earlier or similar stages to those that were tested in Phase I. It could also be tested in combination with existing therapies in these same diseases on early or late stage patients. These studies or the single agent testing could be done in large multi-center trials or in laser focused testing on a small number of patients at a single site. These studies could be designed to determine response rates or monitor other surrogates for survival.

One could even shoot for the whole ball of wax and go for survival in pivotal studies in a Phase II setting. We feel it's important to have a broad program and to have the right broad program, one that fits with our partners clinical, regulatory and commercialization strategy for the product. This means that we'll to wait until we've selected a marketing partner and get Cantuzumab back into the clinic before we'll be able to answer the efficacy questions that you and we want answered.

I am very bullish on the prospects of partnering Cantuzumab Mertansine. After all, it's now at a very different stage than it was in 1999. When we licensed it back then, there were no safety data on the product in humans. Today, we have the findings from 3 Phase I clinical studies that show that it's very well tolerated, even though DM1 is a potent cell killing agent. We know that its principal dose limiting toxicity, elevation of serum levels of liver enzymes, is reversible. We know that it's shown evidence of anti-tumor activity in single agent even in patients whose cancer was resistant to multiple prior agents. We also know that a dosing schedule of once every week or even less frequently offers all the benefits of more frequent dosing without the inconvenience.

We know this about its dosing schedule from analysis of data from the three Phase I studies now completed. In the first Phase I study, Cantuzumab Mertansine was dosed once every three weeks. Its maximum tolerated dose was found to be 235mgs/m2. We also know that it could have been given more frequently since the dose limiting toxicity had resolved before the next dose was given. So in the second study, it was dosed weekly. Cantuzumab Mertansine, again, was found to be well tolerated, evidence of biological activity again was reported, and the FTD was determined to be 115mgs per metered square per week.

In the third study, patients were dosed 3 times per week for 3 weeks followed by a rest week to see if this accelerated regimen, provided a benefit that offset its inconvenience. None was found,. In fact, patients dosed at NTV in the third study actually received less drug on a weekly basis than those in the weekly based dosing study.

The key results from all these studies have been presented and announced. Subsequent to the poster presentations, an additional 12 patients were enrolled in the second study bringing the total to 39, and 2 patients were enrolled in the third study bringing the total to 20. These additional patients didn't change the overall study findings. The results from the first Phase I study were published in the Journal of Clinical Oncology last month. Let us know if you have an interest in receiving the published paper and we'll send you a reprint.

When we announced last summer that GlaxoSmithKline wanted to renegotiate the agreement, a number of companies thought that GlaxoSmithKline had actually returned the product. They contacted us to learn more about Cantuzumab Mertansine as a licensing candidate. We were limited to providing these companies with non-confidential information because GlaxoSmithKline still had the product rights. Now that we have the rights back, we can move forward more aggressively with licensing Cantuzumab Mertansine.

But it's not like all of the company's efforts are devoted solely to that product. We've got a lot more going on. Indeed, in the past few months, we've made important achievements with other TAP product candidates.

In November, the full Phase I findings from the huN901 DM1, DB10-901, Phase I and II study underway in the U.S. were presented as a poster at the EURTC NCI AACR International Symposium in Frankfort, Germany. This poster is on our website.

The Phase I portion of the study included 32 patients, 18 with small cell lung cancer and 14 with CD56 expressing neuro-endocrine cancer. The FTD was determined to be 60mgs per meter squared with the dosing regimen studied, which was weekly dosing for 4 weeks followed by 2 rest weeks. The investigators noted that at this dosage level and below, toxicities were modest. The dose limiting toxicities that occurred at doses above 60mgs per meter squared were headache seen in neuro indrigent patients only, and one case of neuropathy seen in a small cell lung cancer patient. The investigators noted that no hematological toxicity was observed. They also reported that evidence of biological activity was seen.

The Phase II leg of this study is in patients that have relapsed small cell lung cancer. Enrollment is underway in this Phase II study as well as in the Phase I study being conducted in the UK.

We're also making good progress with other programs in our pipeline, including huMy9-6 and the IGF-1 receptor antibody and were delighted when our partner, Millennium, announced that they had initiated clinical testing with their TAP product, MLN2704 --. formerly known as MLN591DM1. MLN2704 is composed of our DM1 and their antibody, MLN591 which targets PSMA, the prostrate specific membrane antigen. We received a million dollar milestone payment from Millennium with the initiation of clinical testing. .

So we have partners that are aggressively moving forward with products that use our technology platform. Our own product, huMy901DM1, is making solid progress at several different sites in different clinical settings. Our in-house work on pipeline products such as huMy9-6DM1 and IGF-1 receptor is going gangbusters. And our business development group is meeting actively with candidates that are potential marketing partners for Cantuzumab Mertansine and our technology platform.

All in all, we're very optimistic about ImmunoGen and our TAP technology and are working hard here on a number of fronts.

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

Thanks, Mitch. About a half hour ago we announced our second quarter 2003 financial results. For the three month period ended December 31, 2002, we reported a net loss of $5.3m or 12 cents per basic and diluted share, compared to a net loss of $1.7 m or 4 cents per basic and diluted share in the same quarter last year. For the six month period ended December 31, 2002, we reported a net loss of $8.5m or 20 cents per basic and diluted share, when compared to a net loss of $3.3m or 8 cents per basic and diluted share in the same period last year.

Revenue for the three months ended December 31, 2002 was $2.5m as compared to revenue of $1.5m for the same period last year. Revenues included a milestone payment of $1m that we received from Millennium related to the commencement of clinical trials for MLN2704. Also included in revenue for the three month period is $948,000 of clinical material reimbursements related to the manufacture of clinical material under certain collaborative agreements and $480,000 of deferred revenue related to payments made pursuant to existing collaborative agreements.

Total operating expenses for the three month period ended December 31, 2002 were $8.7m as compared to $5.1m for the same period last year. Included in total operating expenses for the three month period is research and development expense totaling $6.6m, as compared to research and development expense of $3m last year.

The increase in R&D expense this quarter is related to continued advancement of our TAP technology, support of our collaborators and the strengthening of our research and development infrastructure. Also included in R&D expense for the last three months is $1.9m dollars worth of antibodies that we purchased in anticipation of potential future clinical trials.

We ended the quarter with a very strong cash position of $120.9m. I'm 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 continued to carry out our stated business model with the goal to offset cash burn with cash flow from our out-license collaborations.

Also, as you know, our board has authorized a repurchase of up to 4.1m shares of our common stock and we will continue this ongoing share repurchase program. Through February 4th, 2003, we had purchased 2.6m shares at a total cost of $8.4m.

I'd now like to turn the call back over to Mitch.

Thanks, Gregg. We have time to take a few questions and we're ready to open the call.

Thank you. At this time, if you'd like to ask a question, please press star one on your touchtone telephone. Once again, that's the star key followed by the digit one to ask a question at this time. We'll take our first question today from Yaron Werber, with SG Cowen.

Hi, guys. Good afternoon. I have a few quick questions for you. Can you perhaps provide us a rough guidance here on your timeline as to when you're expecting to enter a new collaboration for huC242?

Well, we're working very hard at it. I think we're reluctant to give out the timing of it, we don't know what the timing is. Suffice to say that we're being quite aggressive about this. We're talking to several parties in earnest and I hope in reasonable time to have a deal to talk about.

Did you - - I know you probably don't want to say too much here, but - - your inclination is to essentially out-license the product or would you want to retain some potential marketing rights and co-development costs as well?

I think that we would be reluctant to take on the development costs and would prefer our marketing partner to do that, and that probably means that we will not have very much in the way of marketing rights for that product. Our emphasis and our focus in terms of our own money in on our in-house pipeline.

Then, shifting over to huN901, can you provide some commentary here? The Phase I that's ongoing in the United Kingdom -- can you discuss a little bit the dose there? The dose planning that's going on?

The schedule is 3 days on, 18 days off and they're accruing patients. I don't actually know at what level they are. As of this point, no information has been disclosed on current levels. We have to take our lead from British Biotech on that. When they're ready to report that, then we'll be able to freely talk about it. But it's really in their hands.

And the idea there is to get information from that trial as well as from the Phase I, II and advanced end of Phase II?

Right -- well, the Phase II is actually ongoing in the U.S. at two sites or more and is accruing patients as we speak. It's using the same method of administration as the Phase I portion of that same study. There is no plan at this time to move the U.K. study into a Phase II. In other words, that method of dosing is not necessarily what we're going to be using in Phase II.

So the idea behind that dose regimen is to gather more safety data or -- ?

Well, both gather more safety data - - I mean, if you look back on our website, you'll see that most of the data that was generated in animals was done on consecutive days, usually five days. We thought that this was a reasonable thing to look at in humans, looking at more frequent dosing regimens. So once a day for 3 days followed by 18 days off is what we settled on. It's analogous to what we've done in mice.

Can you give us some timeline here for My9 - - plans for 9D? Is this an event that's going to be 2004?

You mean entry into clinical studies?

Yeah, following 9D.

Yeah, I certainly hope so.

We'll go next to Jason Kantor with WR Hambrecht.

Hi guys, thanks for taking my call. Two things - - I was wondering if you could just run through what you think are the likely milestones or events we should look for over the next 6 months or 12 months. And also, you said that you're not likely to take on additional development costs for Cantuzumab Mertansine, choosing to focus on the internal pipeline. But it strikes me that this is now part of your internal pipeline and I'm wondering how exactly it doesn't meet an internal hurdle requirement for being something that you would put more investment into.

It's purely market driven, Jason. The product addresses a market that's much larger than we can accommodate ourselves. Whereas huMy9-6 offers us, as a typical pipeline product, offers us a very discreet, focused market that we could do ourselves. And therein lies the principal difference. We just don't think that we're in a position as a small biotech company to go after a market like colon cancer. So that answers your second question, I think.

Your first question that is laying out what we can expect over the next 6 to 12 months. We're very aggressively pursuing a Cantuzumab Mertansine license and I suspect in that time period that we'll be able to have something in place. I don't think in that time period huMy9-6DM1 will be in the clinic. That's not to say that we won't have made substantial progress with it.

We expect huN901 data to be reported both from the Phase I study in the U.K. and Phase II to be reported during the course of this calendar year, data from those studies. We expect -- we would hope that we'll see data from the Millennium Study and the Boehringer Ingelheim study on their products sometime during the course of this year, but we really don't know since they're completely outside of our control.

Finally, our technology platform is being evaluated by a number of companies right now. That is, we've made conjugates using antibodies from other companies that are under evaluation and that we hope will also turn into arrangements, options, or license arrangements during the course of this year.

So there's a lot going on, both in terms of business development and science, that I hope will bear fruit and be newsworthy during the course of the next few months.

Just a final question. It strikes me that the atmosphere for partnering in biotech is sort of slowing down and cooling off and I'm wondering if that's something that you're experiencing or if you could describe how the current environment is for what you're trying to do.

It is not slowing down from ImmunoGen's perspective. We are finding there to be huge interest in doing deals with us of all kinds. I mean, ranging from technology platform licenses to product licenses to even broader sorts of things. So we're not finding -- I don't know how to actually compare it to times past except to say that I don't see any slowdown of interest on the part of big pharma or big biotech or even our peers in the biotech world insofar as wanting to do those sorts of collaborations.

Good to hear. Thanks.

We'll go next to Brian Rye with Raymond James.

Good afternoon, guys. Just sort of a more general question. In various discussions I've been having with folks recently about the tumor activated prodrug space in general, a topic that's becoming increasingly focused on is the linker technology involved in connecting the affected molecules to the antibody itself. Can you take a moment to maybe just go back and refresh our memory on the type of linkage technology you all have and how it sort of differentiates itself from that of some of your competitors?

What we do to create our TAPS is to make a modification to the antibody components of the TAP. Every antibody is slightly different, but they all have what are called primary amines. They all have a chemical entity that contains nitrogen on their surfaces.

We take advantage of the presence of that nitrogen to chemically link a sulphydra group, a sulphur atom, a vial to the antibody. Then we make use of that vial with our DM1. Our DM1 also has a sulphydra group sitting on its business end. We combine the sulphydra group on the DM1 to the sulphydra group that we've stuck onto the antibody to create a disulfide bond. That disulfide bond is what connects the DM1 to the antibody.

Now the disulfide bond has the advantage of being a covalent linkage. In other words, a very strong linkage that does not break down in the conditions that we find in the blood for example, or in a test tube or in the refrigerator or in a vial to release the DM1. That is, the DM1 is stably attached to the antibody.

However, when the TAP, when this product that contains the disulfide bond, reaches a cell by virtue of the antibody attaching itself to its target on the surface of the cell, and furthermore when that complex is brought inside the cell, an essential part of our technology, then that disulfide bond is exposed to agents, chemicals inside the cell that break it.

This is not an enzymatic reaction, it's a chemical reaction. Reducing agents inside the cell are responsible for breaking that bond.

When that bond breaks, when that disulfide bond breaks, the DM1 is released inside the cell and goes on to, in this case, to bind a tubulun and prevent the formation of microtubules which are essential for cell survival.

So the proprietary aspect of this is the design of a molecule based on Mertansine, that is our DM1, that contains a sulphydra group. What we attach to the monoclonal antibody is public domain. Anybody can attach an agent, a chemical, to an antibody surface, that has the sulphydra on it. What's unique is what we then do with it.

We've gone one step further and added a small molecule to this sulphydra group that actually stabilizes it further, makes it even more stable in the blood, so it reduces the possibility of the bond breaking in the blood even further. So we have a solid proprietary position insofar as the linking arrangement is concerned, and we have an effective agent.

Very helpful. Thank you, Mitch.

We'll go next to Richard Oppenheimer, Private Investor.

Hi, Mitch, how are you? As you can tell based on the current stock price, the Street is placing zero value on your technology platform, partnerships and clinical trial results. I am sure you are in complete disagreement with the Street's valuation. So could you tell us in detail why a value should be placed on your technology and therefore your stock price is undervalued?

Oh, sure. I think the reason for the undervalue, and I agree with you -- I mean we're basically selling for cash these days. So there's no value placed on our technology or anything else other than the cash. I mean, there's a huge disconnect between how the Street values what we have versus what we believe our intrinsic value to be. And that disconnect is something that, in part, is influenced by the state of the markets. We're certainly not the only one of our mid-sized biotech peers who suffers from this sort of problem although it's especially negative for us because we really have value here. We've made huge progress and have much to brag about.

So two things. One is what we're doing, which is trying to get out and tell people the story and how we see our technology, what it's done in terms of allowed us to do deals that have minimized our cash burn and potentially yield very lucrative commercial products. So that's one thing.

The second is to just work even harder at trying to get attention-grabbers that will eventually, I hope, translate into the Street understanding really who we are. I mean, what I'm talking about are pushing the products forward in the clinic, trying to release data as quickly as possible, generate that data as quickly as possible, do deals with third-parties as quickly as possible and define ourselves. Define ourselves in terms of our business model to show that our business model, in fact, is working.

I think that it's particularly frustrating because we know that our platform has enormous potential and we know that a lot of other companies think that. Unfortunately, the products that come out of this platform are just not far enough advanced to yield the kind of data that I think would change the Street's view on ImmunoGen's platform. But that's coming and we're making good progress in that and I'm very optimistic that that will change soon. But you're absolutely right, it hasn't changed yet.

One more quick question. I got disconnected so I don't know if you covered this. What's the Genentech situation? Did you touch on that?

No, I didn't touch on it. Genentech, as you know, has Trastuzumab-DM1 in research and pre-clinical studies. We do not know what the timing is for Trastuzumab-DM1 to go into the clinic, but it's very important to us and we believe very important to Genentech that that happens. We're working very hard in providing Genentech all the support they need to make that decision as soon as possible. But I don't have a timeline for you.

We are acutely aware of the importance of that product -- or rather, in bringing that product into human clinical studies. And when they get there, I'm very optimistic that the product will be a useful agent for treating cancer.

As a reminder, to ask a question, press star one on your touchtone telephone and we'll go next to Robert Manning, with Janney Montgomery Scott.

I'm interested in the implications of the $1.9m that you spent on antibodies in anticipation of future clinical trials. I infer from the language, perhaps incorrectly, that that means something other than the four drugs currently in clinical trials?

We haven't made a comment as to what antibody that is. As you know, our business model is to, as best we can, offset our burn by shifting some of the risk of clinical development to our partners and having them use their antibodies conjugated to our TAPS or our small molecule drugs. But under certain arrangements and in our own pipeline we do purchase antibody and that's what it's related to.

So this may mean that it's for one of the four drugs currently in trial and not an implication that you expect to have a new clinical trial going?

Yes.

Okay, thank you.

We'll go next to Yaron Werber with SG Cowen.

Hi, I have a follow on question here. PDL recently mentioned that they're looking to potentially out license Zamal for potential conjugation with something that would be very suited for DM1 or maybe a radio label. Curious -- would you be willing to look at that and if you're worried about the burn rate, would you be willing to maybe partner that in and then partner that out after you conjugate that?

If you're asking about Zamal specifically - -

Or for that matter, let's say theoretically other drugs.

Well, for sure. Our business model is to do precisely that. I mean, to obtain antibodies from other companies who have looked at the antibody perhaps as a naked antibody in the clinic and found it to be one thing and then to do a conjugation with DM1, allow them to test it and then ultimately do a deal. That's basically how we've gotten all our deals done so far. I think Zamal in particular we would not do.

We have our own NDCD33 antibody which we call huMy9-6 -- that's in pre-clinical studies in anticipation of going into the clinic sometime in the near future. So I'm not -- so Zamal is probably not the best example, but there are lots of antibodies out there that have been tested and are not showing the kind of activity that they'd like to see as naked antibodies that would be suitable candidates for our technology platform.

We'll go next to Gary Molyner with Private Investor.

Wondered if you could go into the other effector molecules and specifically address the conjugation you made with My9-6 with DC4 and whether in the future that might either replace DM1 or might work together with it.

We have in fact tested huMy9-6 with DC4 and we find it to be a very interesting alternative to huMy9-6 DM1.

Both DC4 and our taxene effector molecules are -- I would put it this way -- they're not quite ready for primetime. You know, there are, I guess, two essential issues to consider when you're developing new agents.

Number one is their suitability to be formulated as a final product. The question is, is DC4 ready or could there be one more tweak that we could do to it to make it even more ready for suitability in the final formulation. By that I mean is it soluble enough in aqueous solution or any host of things that need to be looked at. So that's one consideration, and the other is the manufacturing process. Is there a manufacturing process that's worked out that's convenient and reasonably inexpensive and is not in high yield and so on and so forth.

So all of that has to be worked out before you can really go forward and say it's ready for primetime. And neither DC4 nor the taxenes are there. They show huge activity when we conjugate them in the laboratory and test them in animals, as we frequently do with all of our products. But is it ready to go into the testing necessary for an IND filing? -- that, 'is this our final manufacturing process and we're not going to change it between now and when we treat our first patient' and so forth? -- I don't think so. So we're focusing, at least in terms of that antibody, on DM1 as the principal effector molecule.

Now that's not to say that an NDCD33 antibody like huMy9-6 with DC4 which, after all uses an entirely different mechanism of action to kill cancer cells, might not be a really valuable product if only as a compliment to the huMy9-6 DM1 and possibly even a product on its own. So, those are things that we're looking at but I have no definition for you unfortunately, Gary.

So I think that's it. That in fact is. That was our last question, Andy. Thank you very much.

Thank you. This does conclude today's conference call. We thank you for your participation. You may now disconnect.