ImmunoGen Inc (IMGN) 2004 Q2 法說會逐字稿

Good day and welcome, everyone, to this ImmunoGen second quarter fiscal year 2004 conference call. Today's call is being recorded.

At this time for opening remarks and introductions, I'd like to turn the call over to the Chairman and Chief Executive Officer, Dr. Mitchel Sayare. Please go ahead, sir.

Good afternoon. Thank you, and good afternoon. Thanks for joining us today and welcome to ImmunoGen's conference call for our quarter ended December 31, 2003. With me is Ginger Lavery, our Vice President of Finance and Treasurer.

At 4:00 this afternoon we issued a press release that summarizes our financial results for the second quarter of our 2004 fiscal year. I hope you've all had a chance to review this release. If not, it's available on our website, immunogen.com.

Before I discuss today's release with you, I'd like to remind you that this call will include forward-looking statements, and that there are risks and uncertainties that may cause our actual results to differ materially from our expectations. Description of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings and on our website, immunogen.com.

My remarks today will be shorter than usual since we had a conference call just last month on our lead products, cantuzumab mertansine and huN901-DM1. For those of you who missed last month's announcement, we now control the future development of both of these compounds and will take them forward into Phase II, prove of concept testing, ourselves.

One of the reasons that we can now move so aggressively in the development of these product is the dramatic improvement in financial strength that our collaboration with Aventis has yielded. This collaboration provides over $50 million in committed guaranteed funding to ImmunoGen over the next three years, plus the potential for milestone payments. This in addition to the $12 million we received up front. It provides us with a reliable source of cash flow and the added value of producing solid progress in advancing our preclinical products.

We plan to conduct proof-of-concept testing of cantuzumab mertansine and seek a partner, a marketing partner only afterwards when we can capture a larger share of the product's value. We plan to conduct this Phase II A study in patients with a specific type of cancer, unliked the mixed cancer population in the Phase I studies. And the product may be studied as either first-line or second-line therapy, depending on the approved treatment for the type of cancer we select. Either way, the patients will not have failed multiple treatment regimens as in Phase I. We'll provide you with more details on our study plans later this year.

In addition, we'll start our proof-of-concept study with huN901-DM1 this year in the treatment of CD56 positive hematologic malignancies. CD56 is expressed in about 70% of multiple myeloma cases and 25% to 30% of acute myeloid leukemia cases, and is also expressed in various other hematologic malignancies.

Our liquid tumor study will compliment the two studies already underway with huN901-DM1 that focus on solid tumors, specifically small cell lung cancer, and thus will further expand the body of data that is being developed around this compound. We expect to start the trial in the second half of 2004 and will provide you with more details on our study plans in our next quarterly call.

Two TAP compounds developed by our partners also are in clinical testing, MLN2704 by Millennium Pharmaceuticals, and bivatuzumab mertansine by Boehringer Ingelheim. Both of these companies are making important progress, and Millennium management indicated in their recent conference call that they expect data on MLN2704 to come out in 2004.

And more good news, our partner Aventis is making solid progress with the preclinical products they license from us. Indeed, we're very pleased with the overall productivity of that collaboration.

Ginger Lavery will now discuss our financials. Ginger.

Thanks, Mitch.

As noted in today's press release, our collaboration with Aventis has had a positive impact on our results for both the three- and six-month periods ended December 31, 2003. For the three months ended December 31, 2003, we reported a net loss of $1.3 million, or 3 cents per basic and diluted share, compared to a net loss of $5.3 million, or 12 cents per basic and diluted share, for the same period last year. The significant decrease in our operating loss for the period is primarily attributable to the $3.9 million of research funding we earned during the quarter pursuant to our collaboration agreement with Aventis.

For the six months ended December 31, 2003, we reported a net loss of $5.5 million, or 13 cents per basic and diluted share, compared to a net loss of $8.5 million, or 20 cents per basic and diluted share, for the same period last year. The decrease in the net loss for the six months ended December 31, 2003, is primarily attributable to $5.1 million of research funding that we have earned under our Aventis collaboration since the beginning of September 2003.

We ended our second quarter with $100.7 million of cash and marketable securities. As we previously disclosed, we received a nonrefundable up front payment of $12 million from Aventis when we signed the collaboration agreement.

This up-front payment has funded substantially all of our cash flow requirements for our first two quarters, including an increase in working capital related to the Aventis unbilled receivables and to inventory produced for our other collaborators during this period. The increase in unbilled receivables in inventory is related to timing, when we produce clinical material, and/or provide services to our collaborators, versus when we can recognize revenue and invoice for those materials and/or services under the contractual terms of our various collaboration agreements.

Our financial situation remains strong, and we are well funded to advance cantuzumab mertansine and huN901-DM1, while we continue to provide the same level of quality service to our collaborators and support our own internal R&D programs.

Mitch.

Thanks, Ginger.

As the financials show, our collaboration with Aventis contributes to our overall financial strength, as well as provides important support to our preclinical products. We're sanguine that the compounds being advanced as part of this collaboration, -- and here I'm not talking about cantuzumab mertansine or huN901-DM1 -- will enter into clinical testing in the coming months and further add to the growing body of TAP products in clinical testing.

Before we open the call to questions, I'd like to address a few questions that have come up in our recent discussions with the investment community. The first is, what effect would a Sanofi/Aventis merger have on ImmunoGen? Can the committed funding to ImmunoGen be canceled?

If Aventis were to merge or be acquired by another company, the new entity will inherit the obligations in our agreement with Aventis. They'll be required to pay us the $50 million plus of committed research support for the three years, as well as fulfill the other requirements in the contract. When we say this is committed funding, we mean it's committed funding.

Another question that's come up is why it takes 12 to 18 months for us to have cantuzumab mertansine ready for clinical testing? The reason is because we have no unexpired product in house. And to manufacture new inventory we need to start with production of antibody. After fermentation the antibody needs to be purified and it needs to undergo the required release testing to confirm, among other things, that it meets the quality standards required for clinical materials.

Release testing is a lengthy process because, among other things, sterility of the material needs to be proven. After release, once the antibody is confirmed to be okay, it can then be conjugated. The bulk conjugate then also needs to undergo release testing, and as part of this, sterility testing is again undertaken.

Afterwards, the final product is put in vials, and the vials undergo final release testing. Now this may sound complicated and a bit redundant, but we're making a pharmaceutical in a highly regulated industry for seriously ill people, so all of these steps are required.

As a final note, when we put the Aventis collaboration in place, we stated that the funding it provides enables us to consider strategic opportunities that wouldn't otherwise be available to us. Examples might include the acquisition of another company or a later staged product.

As noted in our last conference call, we examined a large number of candidates for acquisition. And we concluded that the best use of our funds was to support our own technology and clinical products, namely cantuzumab mertansine and huN901-DM1. So we're advancing these compounds ourselves and are no longer actively seeking acquisition targets.

So, I think we can open the call to questions at this time.

Thank you.

[OPERATOR INSTRUCTIONS]

We'll take our first question from Brian Rye from Janney Montgomery Scott. Please go ahead.

Thanks. Good afternoon, Mitch. Just a quick question, building on some of the things you were talking about on the manufacturing front.

Just generally speaking, now that you're dedicated to taking both cantuzumab mertansine and N901 forward yourselves, could you just talk about the manufacturing capacity you have, and if that would allow you to do some additional projects, as well? Or if that would entail some additional capacity being built out?

No. We have four GMP suites currently operating. And we've determined that those suites are sufficient to provide capacity for all of the product that we need and all of the products that we're contractually obligated to manufacture for our partners. We have five partners, all of whom we'll manufacture, at least, Phase I material for, and we have the potential for actually manufacturing under GMP, materials that will be used in pivotal clinical studies. So, we have ample capacity without having to expend -- or having to build out any new -- any new suites.

Great. That's very helpful. Thanks, Mitch.

Sure.

We'll take our next question from Jason Kantor from WR Hambrecht. Please, go ahead.

Hi. Thanks for taking my question. Since indicating that you were going to change your focus to internal programs, can you tell us exactly what steps you've actually taken within the organization to begin to move any or all of those programs forward or to expand your capabilities to do so?

Absolutely. I mean, the principal thing that we're doing is hiring staff that are needed to undertake these programs internally.

Our Senior Vice President of Pharmaceutical Development, John Lambert, has been acting effectively as our Regulatory and Medical Officer, in addition to being responsible for most of the preclinical studies that our products undergo before they ever reach the clinic. And so what we're doing is hiring vice president-level people at each of -- for each of those positions.

And in addition, I mean, we're doing very similar things in manufacturing and other parts of the company, as well. So, the only place we're not doing it, Jason, is in G&A. For the moment that will stay pretty much as it is. But the other parts of the company will expand, especially at the upper levels to accommodate the needs of this internal focus.

And just a reminder, if you'd like to ask a question, please press star 1 on your telephone. And we'll go next to Larry McCarten. He's a private investor.

Hi. This is a question to Virginia, I guess, Mitch. Thanks for taking my call, by the way.

When I first read, I saw your loss per share, and I tried to work out the number of shares. And it seems awful strange, as if your shares have gone up rather than going down as they've done over the last six months. Is there a reason for that?

It's a weighted average share calculation, so --.

Yeah, I know it's a weighted average, but if we look at, let's say, your year end, you had $41 million, 9. And going to the first quarter, you had $40 million, 5. Now we're three months later, I would think it would have gone down further, unless, of course, there was an increase in shares.

Well, there's always increase in shares when people exercise options and things.

Yeah, but it'd have to be an awful lot of number of shares. Pardon me?

We haven't gone out and sold any shares, if that's what you're saying.

Well, it just seems like it's -- it looks like about -- at least a million shares. I'm just wondering where that came from. Again, if you don't have the figures now, I don't want to take up your time.

Actually, we don't have.

I don't have.

We're struggling to put those figures together, but we don't have them. But suffice to say that -- the main point is that we haven't sold any shares. There are, you know, occasional share stock option exercises that obviously increase the baseline number, but not substantially.

All right. Thank you.

We could, you know, -- if you want to give me a call, Larry, we can certainly talk about that.

No, that's all right. I guess when the actual 10-Q is filed, we're going to see the P & L that will show the number of shares, then I'll see it. Okay? Anyway.

Okay. Good. Thank you. Any other questions, Larry?

And just a reminder, it's star 1 to ask a question. And we'll go next to Cory Steinberg. Please, go ahead.

Hey, Mitch. I had a question. This dates back to your statement in your CEO message, you've said this a number of times, that with the Aventis deal you're in a strong position to use the cash to build ImmunoGen in ways not previously possible.

Obviously, since then you've regained the rights to your two drugs, and you've already mentioned on this call that you're less likely to end license a drug or make an acquisition. But has it also tempered your ability or your likelihood to broaden the scope of the company into either infectious or inflammatory preclinical programs?

Good question.

I don't think that it has. What -- the principal change over the last time we spoke about this is that we're dedicating our affirmative efforts to our own technology and products. That's not to say that we -- if we encounter an interesting product opportunity, inside or outside of cancer, that we wouldn't go after it, but we're not out there actively seeking such things, whereas before, we were.

We actively sought opportunities in infectious disease and autoimmune disease, in addition to other opportunities in cancer, both at the product level and the company level. And it was from that survey of opportunities, and we actually went a little further than that in a couple of cases, than just surveying it. We drew the conclusion that what made sense for us was to really focus on our own technology and products.

Okay.

So, you --

[INAUDIBLE]

-- a change, you'd be right, but the change is one of going from more aggressive to less aggressive toward external opportunities.

Right, right. I understand. This is a little more arcane but I still want to get it clarified.

In the press release it said that the cost of clinical materials was $227,000 compared to $843,000 same period last year, and the R&D expense of antibody was $380,000 compared to $1.9 million in the same period last year. Why the discrepancies? Those are, you know, somewhat substantial differences. I'm just wondering why.

Well, the first one -- the difference in the amount of clinical -- the cost of clinical materials is directly related to the amount of conjugate that we're producing on behalf of our collaborators, which can vary significantly quarter to quarter and annually. So it's really based on what we produce and ship in any period.

The antibody expense is a contract that we had entered into to produce antibody for future clinical trials, which we had disclosed. And it is the same contract, and just the tail end of the contract in the current year, in the current period.

So is it fair to conclude if the amount of conjugate being reimbursed is much less, is because there's, for that period of time, there was less interest in ImmunoGen's antibody for that period of time? Or is that not a fair deduction to make?

It's absolutely -- no, it is an erroneous conclusion to draw. The way that we make conjugate, based on what our partners anticipate their needs will be, varies from one partner to another, and varies from month to month and quarter to quarter. And so the quarterly variability that you're pointing out is just that. It's a timing issue. It is not -- has nothing to do with the interest or lack there of, of any of our partners in the product.

If anything, those -- bivatuzumab mertansine and MLN2704 are being aggressively consumed by our partners in their clinical trials. We know that Boehringer Ingelheim has four ongoing clinical trials, potentially more that we don't even know about. And we know that Millennium has two, not one but two, clinical trials ongoing on MLN2704.

So I think that to read anything more than just differences in timing into those aspects of the financial statements would be erroneous.

I'm glad you clarified that. And lastly, this is something that you didn't mention yet, but Dr. Ian Webb, who presented at the Prostate Cancer Foundation on Millennium 2704, he said publicly that there would be, in all likelihood, a presentation at ASCO, so I think that's very good news, if that's indeed true.

Yeah, we agree. That's very good news if, indeed, that's true.

Alright, Mitch. Thank you very much.

You're welcome. Pleasure.

And just a reminder that it's star 1 to signal for a question . And once again, star 1 for questions.

We'll take our next question from Gary Molinar. He's a private investor.

Hello, Mitch.

Gary.

I just wanted -- or wondered if could you tell us more about the multidrug partners and the billets that they have drugs in, and what's being produced in those partnerships.

No, I mean, I really can't. The -- we have obligations not to disclose what our partners are looking at, you know, what targets, and so forth.

Suffice to say that the multidrug partners are, in fact, looking at multiple targets for, you know, for potential licenses to use our technology with antibodies directed against those targets. But we're not -- we're not permitted to talk about what they are, or even what stage they're at, except to say that they're -- that they're looking.

Are all billets still being filled?

Are all billets? As far as I know, they are, yes. I mean, it would, you know, for me to disclose -- I mean, the numbers of opportunities vary from one partner to another, Genentech, Abgenix, and Millennium. And I'd prefer not to get into the numbers, but suffice to say that, yes, they are looking at others than the ones that we had talked about.

Okay. Thank you, Mitch.

Yeah, no problem.

And this does conclude our question-and-answer session today. I'd like to turn the call back to Dr. Sayare for any additional comments.

Well that's it. I thank all of you very much for your attendance and participation, and look forward to talking to you at the next quarterly conference call, or before then if you give me a call here. Thanks.

And ladies and gentlemen this does conclude our conference today. We do thank you for your participation. You may now disconnect.