ImmunoGen Inc (IMGN) 2003 Q4 法說會逐字稿

Good day and welcome everyone to this ImmunoGen fourth quarter fiscal year 2003 conference call. This conference is being recorded. With us is the Chairman and Chief Executive Officer Dr. Mitchell Sayare and Vice President and Chief Financial Officer, Mr. Greg Beloff. At this time I would like to turn the conference over to Dr. Sayare. Please go ahead.

Good afternoon. Thanks for joining us today and welcome to ImmunoGen's conference call for our fiscal year ended June 30. As you've just heard, with me is Greg Beloff, our Chief Financial Officer.

At 4:00 this afternoon, we issued a press release that summarizes our financial results for our 2003 fiscal year. I hope you all had a chance to review this release. If not, it is available in our website ImmunoGen.com. As always, 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 in our website and in our SEC filings.

Last week, we announced that we entered into an agreement with Aventis, a collaboration that would enable us to develop products faster than would otherwise be possible, and puts the resources of a huge pharmaceutical company behind the new products we create together as well as the three pre-clinical products they've licensed from us. The collaboration also provides ImmunoGen with a substantial guaranteed non-equity funding plus, of course, multiple opportunities for revenue streams from milestone payments and royalties. The guaranteed cash flow enables us to aggressively build ImmunoGen in ways that were were not previously feasible. Given the opportunities now open to us, I would like to spend a minute or two on my vision for ImmunoGen.

Throughout its history, ImmunoGen has always focused on antibodies in cancer. Indeed, we have extensive expertise in cancer and in antibodies. Now, because of the Aventis collaboration, we can broaden our business to become an antibody company and a cancer company, and extend the use of our antibody expertise beyond cancer, and our cancer expertise beyond antibodies. We remain absolutely committed to our TAP technology and expect to create new TAP products, both in collaboration with Aventis and with other new and existing partners. Now, we can also pursue broader opportunities.

Now, let me turn for a brief update on some of the current TAP products in development. The two clinical trials underway with huN901-DM1 and BB-10901 are moving forward. In the U.S., the product is being studied with patient with relapse of small cell lung cancer at three clinical centers, now that Bay State Medical Center in Springfield, Massachusetts, has joined M.D. Anderson in Houston and the Cancer Therapy and Research Center in San Antonio as a study site. Other centers have expressed interest in participating in this study and may be added in the future.

In the U K, a phase one study is in process to assess the safety and efficacy of a more accelerated dosing regimen. The study is being conducted by three centers at four locations. As you know, British Biotech is responsible for the product's clinical program and has the marketing rights in Europe and Japan. However, ImmunoGen retains the marketing rights everywhere else, including the U.S., the largest pharmaceutical market in the world. We also have rights for Cantuzumab Mertansine, which we got back from Glaxo SmithKlein earlier this year. We intend to re-partner the product for clinical development and commercialization, and are in discussions with various companies about it. Needless to say, work on the Aventis deal had to take priority over the relicensing of Cantuzumab Mertansine, so we are not as far along as we would like to be. Actually, we would have liked to have Cantuzumab Mertansine to have been relicensed the instant we got the rights back but that just was not in the cards.

We also will continue to pursue our business model to build ImmunoGen through partnerships around our TAP technology. Such partnerships provide us a source of cash and expand the pool of supported data on our TAP technology. We are pleased with the progress made with the two-partner developed TAP products that have begun clinical testing, being Cantuzumab Mertansine and MLN2704. In their financial conference call, Millennium Management indicated that the company hopes to begin a multi- dose escalation trial later this year with MLN 2704, which we are very happy that they have disclosed publicly. Now, let's have Greg discuss our 2003 financial results.

Thanks, Mitch. About a half hour ago, we announced our fourth quarter and fiscal year 2003 financial results. For the 12-month period ended June 30, 2003, we reported a net loss of 20 million dollars or 48 cents per basic and diluted share, compared to a net loss of 14 .6 million dollars or 37 cents per basic and diluted share for the year ended June 30, 2002. Revenue for the 12 months ended June 30, 2003 was 7.6 million dollars, compared to 5.9 million dollars for the prior fiscal year. Revenue for this fiscal year includes two milestone payments, $1 million from Millennium, and $1 million from Boehringer Ingelheim. Each of these milestone payments relates to the initiation of phase one clinical trials of product candidates developed by these partners using our TAP technology.

Total operating expenses for the fiscal year ended June 2003 were $32 .2 million as compared to $26.4 million for 2002. Included in total operating expenses for 2003 was R D expense of $23.4 million, compared to R & D expense of $17.7 million in 2002. Included in R & D expense in this fiscal year are approximately $7.9 million of process development collaboration costs and manufacturing expenses for antibody,antimithozen P-3, and PM1 (?). In comparison, we spent $3.6 million for these items in fiscal 2002. Also included in fiscal year 2002 R&D was $2.3 million of expense recorded to state inventory at its net realizeable value.

Despite these expenses, we only used $21.9 million of cash in operations in the 12 months ended June 30, 2003. We ended the year with an extremely strong cash position of $101.3 million. It's important to note that this cash balance does not reflect the $12 million upfront payment we recently received from Aventis under our research collaboration agreement. Also noteworthy is that none of this $12 million dollars will be recorded as revenue until our first quarter ended September 30, 2003.

Let me now turn to our fiscal year 2004 financial outlook. Now, please note that this section of the call does contain forward-looking statements with respect to our expected financial performance in fiscal year 2004. The following statements are based on our current goals and intentions, but our actual results may differ materially from those described in these statements.

From a strategic and financial perspective, the recently announced Aventis collaboration achieved several key goals. First, the agreement brings to ImmunoGen significant committed cash. More specifically, we get a $12 million upfront payment, which has been received, but will be recognized as revenue rapidly over the term of the research collaboration. We also get more than $50 million in committed research funding over a three-year period. Aventis also has an option to extend this for one to two years, and an extension of the research collaboration could bring the total committed funding to ImmunoGen of up to $99 million. The immediate infusion of $12 million strengthens our balance sheet, while the committed funding reduces a significant portion of our operating expenses associated with the identification and validations of targets, and developing antibodies and TAPs against those targets.

Second, Aventis now shares the development, clinical and commercial risk associated with developing the licensed products and any other products that come out of the research collaboration. This is significant because it not only increases our return on investment on the licensed products, but it also reduces our overall cost of capital, allowing us to minimize the associated risk with the development of our own new products. These additional financial resources, coupled with our reduced risk profile, afford us the opportunity to broaden our horizons and continue to develop our own products in other areas of cancer and/or antibodies.

So what can you expect our financial statements to lock like for this this fiscal year? For the fiscal year ending June 30, 2004, we expect to incur a net loss between $11 and $14 million. However, the generation of cash flows from both our existing collaborative agreements, as well as payments associated with the Aventis collaboration, will significantly minimize our cash flow burn rate. As a result, the company expects to burn, on an operating basis, between 3 and 6 million dollars. Mitch?

Thanks, Gregg. So, over the coming months you should see changes at ImmunoGen. We now have more resources to develop more antibody-based anti-cancer products, and have a strong partner to commercialize them. And we also have significantly more financial resources to broaden our business into new areas that utilize our core strengths.

We have been a company focusing on antibodies in cancer. We can now become a company focusing on antibodies and cancer. At the same time, we will continue to concentrate on the TAP technology, including the creation of additional TAP partnerships, the licensing of Cantuzumab Mertansine, and the conduct of activities and support of our current partners and their progress. Operator, we are now ready to open the call to questions.

The question and an session will be conducted electronically. If you do wish to signal for a question, please do so by pressing the star key followed by the digit 1 on your touch tone phone. If you are using a speaker phone, please make sure that your mute function is turned off to allow our signal to reach our equipment. We will take as many questions as time permits. Once again, that is star 1 on your touch tone phone. We'll pause for a moment to give everyone the opportunity to signal.

The first question will come from Yaron Webber.

I have a few questions on financial guidance. Given that the initial agreement is for three years, and you received 12 million up front, should we amortize that on a quarterly basis over a three-year period?

That's a good question, and we are working with our auditorstors to determine the appropriate period over which we'll amortize the revenue -- or the upfront payment.

Is that a reasonable expectation?

Yes, it is fairly reasonable. There is a three-year collaboration period and then Aventis has options for years 3, 4 and 5, so we have to figure out with our auditor what's most appropriate. And the collaboration over the three career years, thus we assume it's going to be a third, a third and a third. We have not figured out what the schedule is, but that's a reasonable assumption.

And the net operation loss is between $11 and $14 million but the cash loss is 3 and 6?

Yes. The difference comes from. We have booked a good portion of the cash we received for revenues so that will offset the loss from the P&L.

And we are talking again the 12 million payment?

That's correct. So that gets booked as deferred revenue which, again, sits on the balance sheet and is amortized out over time. But its inclusion in the cash statement offsets the 11 to 14 million dollars operating loss.

You finished the quarter with 11 million and are running about 11 to 13. I think you will have 5 to 7 million of cash. You probably will have more unless you are planning on stepping up the -- let's say R&D and at least cash flow next year.

The five to seven years is the best estimate based on our current expectations. As Mitch outlined in his strategic portion of the call, we are going to be very enthusiastic with our enhanced capability.

You might pursue broad opportunities outside of TAP, can you explain a little bit more, do you have plans to develop the small molecule infrastructure or how should we think of that?

This is Mitch. We feel that our antibody expertise extends beyond the application of those antibodies to cancer and we believe that our cancer expertise extends beyond that which would just deal with antibodies. Yes, we could do small drugs. We are not set up for it today but we have intense interest in that area. We have a number of targets that we have developed in-house and we may pursue such an approach, but it would be a strategic change and I'm just giving you a heads up on that through this conference call.

So that could be an oral chemo therapeutic agent, maybe antibodies for other indications?

It very well could be either those or other things, yes.

Okay. Thanks very much.

Thank you.

Our next question will come from Jason Cantor with W R Hambrecht.

Thanks, guys, thanks for elaborating the vision. I think it's actually very exciting. Could you comment to what extent any of those initiatives that you discussed are already sort of nascently existing in-house so you can begin to work on them right away, or are you on the lookout for technology to bring in or companies to acquire? How do you -- can you comment on that?

Yeah, sure. First of all, we have a great deal of expertise on naked antibodies. And, as you know, one of the products that was licensed to Aventis is a naked antibody that we have developed that has shown biological activity. So we are prepared to develop products not only that are TAPs but also that don't involve the delivery of an effect for molecule on an antibody.

Let me say that, way back in 1992, we founded a subsidiary of ImmunoGen called Abi, the purpose of which was to develop an understanding of lesions in aphitosis path ways in cancer cells that we may be able to address in either antibodies or small drugs. It is that effort that has yielded interesting target opportunities. Some of those targets have been validated biologically using our antibodies and other expertise in-house, and we look at those targets as potential focus areas for the development of both antibodies and small drugs, going forward. So that's just a taste of the kind of thing that we might go forward with in the future.

I think it's also reasonable to say that this sort of strategic change might involve us looking at other companies and what those other companies have, either in their pipeline or in their research areas, that would complement what it is that we are doing. In order to achieve those objectives, that is to develop small drugs for cancer or to develop non-cancer applications of antibodies.

Could you tell us what the status of A-T-I is? I have not heard much about that.

A-T-I is not fully absorbed back into ImmunoGen, it is substantially owned by ImmunoGen. It's -- its personnel or ImmunoGen personnel at this time. So there is a fairly significant patent estate that is owned by A-T-I and exclusively licensed today by ImmunoGen but it has no operating function at this time..

Okay.

Once again, as a reminder to our audience, that is star-1 on your touch tone phone to signal for questions. We'll take our next question from Robert Manning, Janey Montgomery Scott.

Can you tell us anything that you can tell us about the date of expected clinical trial results from any of the three collaborations that you have now?

We actually can't. Boehringer Ingelheim, a privately held company, exercises its right to not say anything about it. I know they are the least likely ones to tell us anything. And then Millenium, periodically, discloses information and they did at their most recent conference cal,l and there have actually been some information that was disclosed to private individuals posted on various websites. And that's -- but beyond that, we have no information on when the next stages of either disclosure of clinical data will be made or the initiation of further clinical trials. And we are hoping that the huN901-DM1 study will yield some data in the reasonable future but we have no target date at this point.

Can you give us any color on the double or more than doubling of the processed development and manufacturing costs? Does this simply reflect that you've got more drugs in trials now and, therefore, the need to manufacture more, or does it suggest that there is other stuff going on that might -- that we might see more about it in the future?

Let me remind you that substantially all of those costs are reimbursed by the -- by our collaborators. Most of those costs are associated with preparation of materials for clinical trials, and for our collaborators. So that's where that comes from. There have been inventory adjustments that we have made over the course of the last year that we have disclosed but that's largely where it derives from.

Just the last thing, a clarification, language, you say with regard to the Aventis collaboration that you could receive milestone payments of 20 to 30 million, depending upon regulation achievement or royalty of sales. I think that could be in excess of 20 to 30 million? That's not a cap on the royalties that you could receive?

That's correct. The 20 to 30 million is nothing to do with the royalties.

Thanks. That's what I assumed. I just want to be sure. Thanks. Sure.

Our next question will come from Bob Derasalis with Wellington Management.

Can you talk about the three products that you have outlined as part of this deal, what specifically they were?

Sure. We disclosed what two of them were, and we disclosed what the focus of the third one is, so let me go through that. The first and the most advanced of the products in our portfolio, pre-clinical portfolio, huMy9-6-DM1 is an agent designed to acute myelogenous leukemia, focused on the antibody. We have very good pre-clinical data, animal data. We will have some head-to-head comparison with that.

Right.

That was scheduled for a filing in the first half of calendar year 2004. Now it is under the control of Aventis. I don't knw what that time line is. That is up to us and them. The second is the naked antibody directed against the IGF-1 antibody receptor. We thought it made sense to pursue this at least initially without creating a TAP out of it, that is, without the addition of an effector molecule to it. It's very interesting, exciting. It is a few months behind huMy9-6-DM1 in terms of the time line and it was obviously licensed to Aventis.

The third, we have not disclosed the name of the product or what the specificity of the antibody is. It's a TAP and it's directed to non-Hodgkins lymphoma. We think that's a hot area, as you know, and needs to be serviced more than it's being serviced today. I think this product could do that. It's not as advanced as the other two products that we license with Aventis.

Does that later product have a price target or is that -- is a proprietary target or is that in the public domain?

I guess Cd-22 is proprietary, but I would prefer not to go there if I could , so that I don't disclose too much.

Okay, thank you.

Sure.

Once again, as a reminder to our audience, that is star-1 on our touch tone phone for your question..

I think we have time for one last question if we could do that, Allison.

We'll take our final question, as a follow up from Yaron Werber.

Mitch, if you could answer that question. The IGF-1, the naked antibody against the receptor, would it be possible to be in 2004?

We were certain looking for 2004 for an ID N filing (?). That's calendar 2004, not fiscal.

Right. Just to try to understand a little bit going forward, are you pretty much trying to continue to play in the pre-clinical space mostly, or should we expect maybe some forward-looking integration into the clinical arena as well?

We are not, at this time, interested in building clinical infrastructure. We have done a very good job of bringing our products up to the clinic, filing the IND, doing all that's necessary to get the product into the clinic. Blue for the moment, we are very satisfied with our arrangements with Aventis and others to bring that product through the clinic. And I do not see in immediate future any change in that at ImmunoGen -- at least that's our current vision.

And so when you are looking ahead in your own vision and you see the company over the next 12 months, do you think we should be seeing any types of transactions, or types of announcements? Are they going to be happening in the nearer terms in terms of fostering the technology of the company, or is this something that's going to be evolving overtime?

I think we would like to pursue the use of our existing technology to focus on product areas that programs we have not been as focused on before. That is using antibodies outside of the cancer space. We would also like to use our pre-clinical expertise bench and pre clinical expertise in cancer with products other than antibody products and, so I think both of those areas are likely to get some attention over the next period of time.

So it does sounds like you are armed with cash and you have an opportunity to really develop things from the ground up then?

We do. We very much do.

Okay, great. Thanks very much.

Thank you.

At this time, this would conclude our question and answer session. I would like to turn the conference back to Dr. Sayare for any additional or closing comment.

No, that's fine. Thank you very much. I appreciate everybody tuning in, and please call us for questions offline if you have any.

Thank you for your participation on today's conference call. You may disconnect at this time.