ImmunoGen Inc (IMGN) 2005 Q2 法說會逐字稿

[OPERATOR INSTRUCTIONS] Welcome to this ImmunoGen second quarter fiscal year 2005 conference call. Today's conference is being recorded and at this time for opening remarks and introductions I would like to turn the call over to the Chairman and CEO, Dr. Mitchel Sayare. Please go ahead.

Mitchel Sayare, PhD: Good afternoon and welcome to ImmunoGen's conference call for our second quarter, ended December 31st, 2004. With me is Karleen Oberton, our Senior Corporate Controller.

At 4 o'clock this afternoon we issued a press release that summarizes our second quarter financial results. I hope you've all had a chance to review it. 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. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings which can be accessed from our website.

In December, the Centocor subsidiary of Johnson & Johnson licensed the right to use our TAP technology for an undisclosed target. As many of you know, Centocor is one of the world's three most successful antibody companies. The other two are Genentech and Biogen Idec, also licensees of our technology.

Seven major companies have now licensed rights to our TAP technology -- Centocor, Biogen Idec, Genentech, sanofi-aventis, Millennium Pharmaceuticals, Boehringer Ingelheim and Abgenix. These partnerships provide Wall Street with reasonable comfort that smart, independent parties are willing to spend millions of dollars to access our technology.

Importantly, these partnerships increase our shots on goal because our technology gets used with antibodies that are proprietary to other companies and not otherwise available to us -- antibodies like Genentech's Herceptin and Millennium's anti-PSMA antibody. So we can derive a financial return from TAP products that wouldn't otherwise exist.

Our business model is to develop our own products and help pay for our programs by out-licensing our technology to select partners. We invest cash we receive from these partners in our own product programs. Indeed, the cash we received from our partners over the past two quarters has covered virtually all of our operating costs, so we have had minimal cash burn so far this year.

We started our 2005 fiscal year with $94.6 million and ended up with $93.3 million in cash and marketable securities at the close of the quarter and during this same period we made significant progress with our lead compounds, huN901-DM1 and huC242-DM4.

At the start of the fiscal year, we took over the Phase I/II study underway with our compound huN901-DM1 from our former partner, Vernalis. We've increased the pace of patient enrollment in this study and we've submitted the findings to date for presentation at the annual meeting of the American Society of Clinical Oncology. If accepted, we'll report Phase II data on huN901-DM1 at the ASCO meeting in May.

All of the patients in the Phase II leg have the same type of cancer, relapsed small-cell lung cancer, and all receive the same dose of huN901-DM1, 60 mgs per meter squared. So this is a more homogeneous group of patients than was in the Phase I leg of the study, which included patients with carcinoid tumors and which used a number of different dosage levels. While the patient numbers won't be huge, we hope to report on all of the patients that have been treated in the study at the time of ASCO.

I should note that Vernalis is making progress with the Phase I study currently ongoing in the UK, so data should be reported from that study, too, at some point.

huN901-DM1 also has potential utility in the treatment-- in the treatment of hematological or liquid tumors. To examine this opportunity for the compound, we are implementing a study with huN901-DM1 in multiple myeloma. Our clinical department is working hard to get everything set with the study centers and we expect patient dosing to begin soon. We'll let you know when that happens.

We're also making good progress with our huC242-DM4 compound and remain on track to begin clinical testing with it in mid-2005. We're confident in the design of huC242-DM4 and believe this compound will become an important treatment for CanAg-expressing cancers like colorectal and pancreatic.

An abstract on our preclinical findings with huC242-DM4 was accepted by the American Association for Cancer Research. These findings will be presented on April 17th at the AACR annual meeting in Anaheim, California. The presentation will include data on how huC242-DM4 compares with its predecessor, cantuzumab mertansine. We'll share the data with you once they've been presented.

Our partners are making solid progress as well. We expect patient dosing to begin very soon with the anti-CD33 TAP licensed by sanofi-aventis and we'll let you know when that has happened.

Millennium has indicated that they expect to report data from the Phase I/II multi-dose study underway with their TAP product, MLN2704. We expect new data on this TAP compound to be presented at the ASCO annual meeting in June.

Karleen will now discuss our second quarter 2005 financial results. Karleen?

Thanks, Mitch. For our second quarter ended December 31st, 2004, our net loss was $2.2 million or 5 cents per share compared to a net loss of $1.3 million or 3 cents per share for the same quarter last year.

Revenues for this quarter were $9 million as compared to $5.2 million for the same quarter last year. Our second quarter '05 revenues include research and development support fees from sanofi-aventis of $4.1 million as compared to $3.9 million for our second quarter '04. This quarter's revenues also include $3.6 million in reimbursement for the production of clinical materials for our partners as compared to $227,000 for the same quarter last year. They also include $1 million of license fees and milestone payments, about the same in our second quarter '04.

Our total operating expenses for our second quarter ended December 31, 2004, were $11.7 million as compared to $6.8 million for the same quarter last year. Our second quarter '05 operating expenses include $3 million in cost of clinical materials reimbursed as compared to $227,000 in the quarter last year. And they include research and development expenses of $6.6 million as compared with $5.2 million in the same quarter last year.

We had $94.6 million in cash and marketable securities on June 30, 2004, and $93.3 million on December 31st, 2004, so our cash use was, as Mitch said, modest for the first six months of this fiscal year. We continue to have no debt.

As Mitch noted, our financial performance is a direct result of our business model, which is to develop our own products and help fund our product programs by selectively licensing our technology.

Mitch?

Mitchel Sayare, PhD: Thanks, Karleen. So ImmunoGen is in excellent shape financially. We're making very good progress and our partners are making solid progress, as well.

Over the next six months we expect that we'll begin patient dosing in our clinical study with huN901-DM1 in the liquid tumor malignancy multiple myeloma. Our partner sanofi-aventis will begin patient dosing with their anti-CD33 TAP for acute myeloid leukemia. We'll present preclinical data on huC242-DM4 at the AACR annual meeting in April. Our partner Millennium will present new data on their MLN2704 compound at the ASCO annual meeting in May. We'll present Phase II data on our huN901-DM1 TAP at the ASCO meeting in May and we'll start patient dosing with the huC242-DM4 in mid-2005.

So a lot's happening, a lot of shots on goal by us and our partners. And so now I'll open the call to questions, Millicent (ph).

[OPERATOR INSTRUCTIONS] Brian Rye, Janney Montgomery Scott.

I just wanted to touch base on the level of reimbursable material-- reimbursable cost of clinical materials. It went up sequentially again. Obviously, I think that's a good sign that there's a lot of activity going on with your partners. Is there any sort of color you can provide on-- maybe breaking down if that's an increase in current partners or new activity from some of your newer agreements that were signed towards the end of last year?

Mitchel Sayare, PhD: No, I think it just reflects solid progress being made by those partners who are in the clinic and other partners that are nearing clinical studies are also putting in orders for materials. I think it's sort of a natural progression. We would expect to see this continue. I don't think there were any remarkable or outside-of-the-ordinary new orders for material.

OK. And then just one housekeeping question. I assume there aren't any changes for the full year financial guidance for the expense items?

Mitchel Sayare, PhD: That's correct. We have not changed our guidance for the full year.

Sounds good. Thanks, Mitch. Another good quarter.

David Muno (ph), First Albany.

Great quarter. I just had a question if you could discuss whether the trastuzumab program at Genentech is active, if there's any progress there? Thanks.

Mitchel Sayare, PhD: Sure. We have been advised by Genentech to allow them to speak about that product to the greatest extent possible. We can say there have been some publications, notably a patent issued-- I'm sorry, it was published by Genentech in which they disclose some of the data on the trastuzumab DM1 product that had not been disclosed before, specifically demonstrating very low levels of toxicity, much lower than expected or than we'd seen with other products.

But beyond that, no, we have not-- we have not-- we're not in a position to be able to say anything further. Perhaps Genentech is, but we cannot at this time.

Do you know if they'll be presenting any data on it at any upcoming meeting or anything like that?

Mitchel Sayare, PhD: The only thing that I know of is data will be presented at various university academic settings. But I don't know of any investor conferences or scientific conferences at which data will be presented.

Jason Kantor, WR Hambrecht.

Could you comment on the R&D spending? It seems that relative to all the stuff you're doing internally, it seemed relatively low and almost-- more than half covered by your revenues for R&D. So I'm just wondering if you could comment on that and what we might expect from that for the rest of the year?

Mitchel Sayare, PhD: OK. We, of course -- Jason, nice to hear you. We, of course, haven't given guidance on the specifics of R&D expenses during the course of the year. I think that the numbers that we show here reflect what our expectations were.

We have solid development work going on in house with our own products. Those products are picking up steam. The accrual rate for the small-cell lung cancer product, of course, which we're paying for completely, has stepped up. The preparation for the multiple myeloma product has stepped up and these-- we incur greater costs. I think what the numbers reflect is that we're controlling those costs to the greatest extent possible and so the ramp-up hasn't been severe.

Is there something in the first quarter, your first fiscal quarter that was unusual?

Mitchel Sayare, PhD: You mean in terms of expense or in terms of revenue?

In terms of R&D such that it was higher last quarter than this quarter. You know, one explanation is that last quarter--

Mitchel Sayare, PhD: There was a technical-- there was a technical explanation and I'll give that to Karleen to answer.

Sure. We had-- in the first quarter we had approximately $1 million charge to reserve for excess DMX raw materials we had on hand.

Mitchel Sayare, PhD: We have an inventory policy that specifies that if the DM1 or DM4 has not been used-- is sitting in inventory and has not been used in a product itself ordered by one of our partners within a certain period of time then we have to-- we have to expense it. And that's exactly what happened in the first quarter. It didn't happen in the second quarter. So-- and our inventory policy is pretty strict and severe and we follow it precisely. So that, I think, explains at least $1 million difference, Jason.

One other thing on the MLN2704. I think the most recent comments from Millennium was that they thought they could potentially be in a pivotal study in the next 12 to 18 months with that and when asked what their-- what's going to gate the timing of that, one of the things that they mentioned was getting manufacturing put together. Is-- what can you say about what role you're playing in the manufacturing of that molecule and to what extent the conjugation aspect or the DM1 aspect of that is a gating factor for getting manufacturing put together for the Phase III?

Mitchel Sayare, PhD: Right. Right. As we've explained in the past, we're responsible for Phase I and Phase IIa material for all of our partners and we've been delivering that and that's, of course, what they've been using in their clinical studies to date. Moving into pivotal, none of our deals with any of our partners includes an obligation for ImmunoGen to manufacture the material for those studies.

We work closely with our partners, including Millennium, in providing process development for coming up with commercial processes for the manufacture of final product. And, as I say, we're doing that with Millennium as we are with other companies.

But, again, the access of the actual manufacturing facility and so forth is completely up to our partner and not up to us. So as far as we're-- as far as we know, I mean, everything is going along well and they're doing it. I don't believe that delivery of DM1 or its conjugation is a gating factor in any of the manufacturing or their manufacturing of clinical grade material at either Phase II or beyond.

OK, we can-- Jason, did you-- was that-- did you hear the answer?

Hearing no response. [OPERATOR INSTRUCTIONS] Andrew Schopick, Nutmeg Securities.

Karleen, could you remind me what the term of the agreement with sanofi is as it relates to the $12 million up-front payment? How many more payments will be made pursuant to that agreement over what time frame?

Sure. Specifically, the $12 million up-front we are taking that revenue in over a five-year period.

Five years? Yes, I realize that you've received it and I just want to know how much more there is to recognize.

So there is-- we're taking in-- Well, I would say there's a little more than half to still recognize.

Mitchel Sayare, PhD: Right. We-- so far we've had 6 quarters since the beginning of the deal-- 7 quarters since the beginning of the deal and we have 20 total, so-- so we're amortizing it over 20 quarters.

[OPERATOR INSTRUCTIONS] Dory Steinberg (ph), private investor.

The $3.6 million of clinical material reimbursement from partners, was any of that money from Abgenix? And do you break down the material by partners if asked to do so?

Mitchel Sayare, PhD: No, we don't, Dory (ph). We don't. That is the total from all the partners during the quarter.

OK. Also, in your November 4th CEO message -- and this is just kind of a follow-on question about Genentech -- but you gave what I perceived as an optimistic statement saying that you continue to work with Genentech on an anti-Her2 TAP compound and are hopeful it will advance into clinical testing in the not-too-distant future. I assume you still stand by that statement?

Mitchel Sayare, PhD: We continue to work with Genentech. Genentech has advised us to not say anything that they haven't explicitly said themselves and so you're going to have to get further color on that statement from Genentech.

OK. And lastly, do you have any sense of when a permanent CFO will be in place?

Mitchel Sayare, PhD: Well, we're-- we're in the middle of a search right now. The search continues beyond our CFO who recently left, Christopher. We have a number of candidates who we've interviewed and we continue to see good candidates. So I make no predictions as to when, but we're working hard on it.

Gary Molinar (ph), private investor.

The Genentech multi-drug contract will be basically ended or extended later this year. Could you explain what will happen to the drugs that are created during that contract, whether you'll continue to make them and Genentech can continue to license them, et cetera?

Mitchel Sayare, PhD: So a multi-target deal involves the ability of a partner to examine the activity of a conjugate made of an antibody against that particular stated target and one of our maytansinoids. The option that the third party takes by doing that can be converted into a license if they decide to go forward with the product.

In the case of Genentech, they have-- we have two deals with Genentech. We have the multi-target deal, which you referred to, and then a completely separate agreement on Herceptin, on trastuzumab. In fact, the trastuzumab arrangement is an out-and-out license. That is, we licensed to Genentech the right to use the maytansinoids with Herceptin or any Her2-binding antibody. The multi-target deal, which you refer to, has a number of targets that they have access to on an option basis. And these do not include Herceptin.

What would happen if that were to expire and no licenses were to be granted to Genentech, the resulting targets become available for use with the maytansinoids to anybody who wants them, including us. The issue, however, is whether or not there is IP that covers those targets that might prevent a third party or ImmunoGen for-- from using antibodies against that target with or without a maytansinoid.

And we haven't disclosed what those targets are since our agreement specifies that we will not disclose it without the partner's agreement and we haven't gotten that agreement. And so we're not in a position to really opine on whether or not we would decide to go forward or we will decide to go forward or not with any of the targets that might become available should that agreement expire.

So that's my long answer to a very short question.

And that does conclude our question-and-answer session. I'd like to turn the conference back to our speaker for any additional or closing comments.

Mitchel Sayare, PhD: Well, I don't really have very much more to say except thank you very much for your attendance today and I look forward to talking to you in about three months from now.

[OPERATOR INSTRUCTIONS]