ImmunoGen Inc (IMGN) 2005 Q3 法說會逐字稿

Good day, and welcome, everyone, to this ImmunoGen third quarter fiscal year 2005 conference call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Chairman and Chief Executive Officer, Dr. Mitchel Sayare. Please go ahead, sir.

Thanks. Good afternoon, and welcome to ImmunoGen’s conference call for our third quarter ended March 31st, 2005. With me is Karleen Oberton, our Senior Corporate Controller. At 4:00 this afternoon, we issued a press release that summarizes our third 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 need 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.

As you can see from our financials, our cash burn for the first 9 months of this fiscal year was approximately $3 million overall, and $1-1/2 million on an operating basis. This is against total expenses of about $37.8 million during the same 9-month period. Our low burn rate is a direct result of our business model -- to develop our own wholly owned products and help fund these programs by outlicensing our payload technology to other companies for use with their proprietary antibodies -- antibodies like herceptin that aren’t available for use in our own product programs.

Speaking of herceptin, as you know, Genentech was the first company to purchase access to our payload technology when they licensed the right to use it with antibodies to HER2 such as herceptin a few years ago. Last week, Genentech became the first company to take a second license to use our payload technology, this time with their antibodies to an undisclosed target. We received $1 million from Genentech with this event, and are entitled to receive milestone payments and, of course, royalties on sales of any resulting products.

Then, earlier this week, Genentech renewed the multi-target agreement that enables them to test our technology with their antibodies to specific targets. We received $2 million from Genentech as a result of the renewal. I want to make it clear that it was only the technology access agreement with Genentech that was expiring. The license agreement that allows Genentech to use our technology with antibodies to HER2 such as herceptin did not need to be extended.

Two of our other partners also had recent achievements. Millennium reported the final results from their phase 1 single-dose escalation trial at a prostate cancer symposium in February. The full results from this study were consistent with the preliminary findings reported at ASCO last May. And Millennium is scheduled to report data from their multidose study at ASCO on Saturday, May 14th. Millennium said on their recent conference call that these will be interim results in about 21 patients since enrollment is still ongoing.

Our partner Sanofi-Aventis moved the anti-CD33 compound that they licensed from us into clinical testing. We earned a $2 million milestone payment in March when the first patient was dosed. This compound, now known as AVE-9633, is in development for acute myeloid leukemia. So our partners are busy, and they’re providing us with cash.

We, in turn, are actively engaged in the development of our own products. We’ll report data on huN901-D01 at ASCO on Tuesday, May 17. In accordance with ASCO rules, we’ll put our press release out after the start of the poster session at 8:00 a.m. The data reported will be from the phase 2 leg of the phase 1-2 study underway in the US. All of the patients in the phase 2 leg have advanced small-cell lung cancer, and all have relapsed following treatment with other agents, although their cancer is not necessarily refractory. The patients receive 60 migs per m2 of huN901-DM1 weekly for 4 weeks in a 6-week cycle. We expect to report data on about 12 to 15 patients, since this study is still underway as well.

We also are preparing to start a trial with this compound in CD56-positive multiple myeloma. As you know, we were hoping the trial would start a little earlier this year. It was delayed for purely logistical reasons by the institutional review board of the clinical site where the study will be conducted. Happily, that is now behind us, and we expect dosing to begin within the next month or so. We’ll announce it when it happens and provide more details on the study at that time.

We’re making great progress with huC242-DM4, and expect to begin clinical testing with this compound within the next month or so as well. The IND has been reviewed by FDA, and we’re pretty much set with the study center and their IRV. We’ll provide you with more details on this study when patient dosing has begun as well.

In April, we reported preclinical findings with huC242-DM4 at AACR. In our models, we found huC242-DM4 to be much more active than huC242-DM1 against colon cancer cells, yet provide comparable tolerability. HuC242-DM4 is also highly active against CanAg-expressing pancreatic, gastric, and lung cancer cells. We believe that, in clinical evaluation, huC242-DM4 will prove to be highly active at doses that are well tolerated.

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

Thanks, Mitch. For our third quarter ended March 31, 2005, our net loss was $3.6 million, or 9 cents per share, compared to a net loss of $.8 million, or 2 cents per share, for the same quarter last year.

Revenues for this quarter were $10.2 million as compared to $7.6 million for the same quarter last year. Our third quarter ’05 revenues include research and development support fees of $4.6 million as compared to $4.1 million for our third quarter ’04. This revenue was primarily earned in our collaboration with Sanofi-Aventis, but also includes amounts earned under our agreements with Biogen Idec and Centocor.

This quarter’s revenue also includes $2.4 million in reimbursement for the production of clinical materials for our partners, as compared to $.9 million for the same quarter last year. And it includes $3 million of license and milestone fees, as compared to $2.6 million for our third quarter ’04.

Our total operating expenses for our third quarter ended March 31, 2005, were $14.3 million, as compared to $8.7 million for the same quarter last year. Our third quarter ’05 operating expenses include $2.3 million in costs of clinical materials reimbursed, as compared to $.7 million in the same quarter last year. And they include research and development expenses of $9.8 million, as compared to $6.2 million in the same quarter last year.

Included in research and development for our third quarter ’05 is a $1.3 million expense for excess raw material inventory. In accordance with our accounting policy for inventory reserve, we expense the cost of raw materials in excess of 12 months forecasted demand, and forecasted demand was reduced with discontinuation of development of bivatuzumab mertansine by Boehringer Ingleheim in February of 2005.

We had $94.6 million in cash and marketable securities on June 30, 2004, and $91.6 million on March 31, 2005. During the first 9 months of our 2005 fiscal year, we burned $3 million in cash overall, and $1.5 million in cash on an operating basis. Our low use of cash is a direct result of our business model. Mitch?

Thanks, Karleen. I couldn’t help but notice that our loss for the quarter was right on the consensus number. However, I want to take a moment to explain that, for a company at our stage, earnings are substantially less important than executing a successful business model that yields good cash management and vigorous product development. Our business model is not designed to maximize earnings; rather, it is intended to provide a way for us to spend significant dollars on developing our own wholly owned products while not requiring us to keep going back to the financial markets to find cash and, potentially, dilute our shareholders.

I’m sure you understand that earnings, after all, are dependent upon revenues. And that cash payments that we receive from our partners are sometimes subject to treatment that puts the cash in our treasury, but not on the P&L. A good example is the treatment of two recent payments from Genentech. As I explained earlier, we received $3 million in cash from them in the last few days -- which cash, incidentally, though in the bank now, will appear on next quarter’s balance sheet and is not included in today’s report.

The first payment -- the $1 million -- was for a new license that Genentech took to make use of our payload technology with antibodies to a target that they’ve asked us not to name. You should know, incidentally, that each license that Genentech takes comes with additional potential milestone payments of $38 million.

According to our policy for revenue recognition, up-front payments for payload licenses are spread out over 6 years. So only a small portion of the cash that comes in in this form hits the revenue line of the P&L in any given period. The balance is recorded as deferred revenue on the balance sheet, and is recognized through the P&L over time.

The second payment Genentech made -- $2 million -- was to purchase a 3-year extension to their option agreement with us. And let me be really clear -- this was not a license fee. Rather, we granted Genentech the right to continue to test our payload technology for 3 years with a specific number of targets every year. The payment is for testing only.

They may take a license if they determine that they want to move forward with a target they’ve tested under the agreement. The unnamed target license that I just talked about is an example of how this process works.

Now, since the extension is for 3 years, our policy for revenue recognition has us gradually recognizing the $2 million over 3 years. Again, the cash is received right away, but the revenue is recognized only gradually on the income statement. That’s why earnings, so dependent on revenue, aren’t particularly important at our stage.

What’s important is cash. Our cash balance depends entirely on the cash that comes in from our partners, and the cash that goes out to fund development. Well, it turns out that we’ve been pretty at managing cash this year.

Which brings me to the need to revise the guidance we gave you 9 months ago for this fiscal year. In our original guidance, we said that we expected to burn between $10 and $13 million on an operating basis. We reported today that, for the first 9 months of the year, we burned $3 million total, of which $1-1/2 million was from operations. For the full 12 months ending June 30, 2005, we currently expect our total cash use to be between $5 and $6 million, of which $3 to $4 million will be from operations.

At the start of this fiscal year, we also gave guidance that we expected our net loss for the year to be between $17 and $20 million. Based on our current projections, we now expect our net loss to be between $12 and $13 million for the fiscal year ending June 30.

Although some of the difference in these numbers relates to timing, much of it rests with operating efficiencies. After all, our partners cover a lot of our costs, which helps pay for the resources we need for own wholly owned products. I’m really delighted with these numbers, and I hope you are, too. I believe it reflects a very effective business model.

So, while ImmunoGen is in excellent shape financially and will end the year with around $89 million in the bank, we and our partners both are making excellent progress in product development.

In my last call, I said that by the end of our fiscal year this summer, we expected that, (1) our partner Sanofi-Aventis would begin dosing patients with Hy-My-9-6-DM4 or ABE-9633. And as you know, this has occurred.

(2) That we’ll present clinical data on huC242-DM4 at ACCR, which has also occurred. And in fact, we presented data generated by us and by Sanofi-Aventis on ABD-9633 at that venue as well.

(3) We said that our partner Millennium will present new data on MLN-2704 at the ASCO annual meeting in May; this happens in a couple of weeks.

(4) We said that we’ll present phase 2 data on huN901-DM1 at ASCO in May, and this also happens in a couple of weeks.

We said that we expected to started to expect dosing with huN901-DM1 in multiple myeloma, and I’m happy to report that the start of the study is imminent.

And (6) we said that we’ll start patient dosing with huC242-DM4, which should also start very shortly. So despite anticipating a cash burn of no more than $5 to $6 million total for the year ending June 30, we expect to meet all the milestones we laid out for this fiscal year.

All in all, I’d say our future looks pretty exciting. And now, I’ll open the call to questions.

Yes sir, thank you. [Instructions] We’ll take our first question from Brian Rye, Janney Mongtomery Scott. Please go ahead.

Good afternoon, and thanks for taking my question.

You’re welcome.

I just wanted to sort of take a step back, Mitch, and from a conceptual basis, talk about the difference between DM1 and DM4 and why they might work better or worse, relatively speaking, in different tumor settings. Obviously, the company’s very excited about N901-DM1 in a number of settings, but then also, C242-DM4 as well. So help us understand, again, what the differences are, and why one might be better suited for one set of tumors versus another.

Well, I think it actually, probably, is not the tumor as much as it is the particular antibody. The environment on the surface of the antibody that we use to attach DM1 or DM4 to is different with every antibody. And what we found was, because of the minor structural difference between DM1 and DM4, some antibodies create more stable conjugates with DM1 than they do DM4, and some more with DM4 than DM1. And we found that, in some cases, that enhanced stability increases activity against the targeted cells and reduces the degradation of the product over time in the blood.

But again, it varies from one antibody to another. For example, herceptin is currently being tested with DM1 attached to it, whereas the CD33 product uses DM4. We found that DM4 is superior to DM1 with that particular antibody; same with C242. So it varies depending upon the antibody, is the way that we see it.

Great. Thanks, Mitch.

Sure.

[Instructions] And we’ll go next to David Webber, First Albany. Please go ahead.

Thanks for taking my question. A couple of questions. First, the DNA license to the new target, Mitch. Can you say whether that’s with DM1 or DM4?

No. They have the right to make an assessment of any of our maytansinoid products.

Okay. And can you update us at all on the trastuzumab DM1 program -- what the status is?

I cannot. You’ll have to get that information from Genentech.

Okay. And regarding the excess raw material expense in the quarter -- does that account for all of the Boehringer Ingleheim material?

No, the write-off-- a portion of it was due to the reduction in demand due to Boehringer Ingleheim’s discontinuation of development. Another portion related to production during the quarter of new material.

Okay, thank you.

You’re welcome.

[Instructions] And we’ll go next to Jason Kantor, RBC Capital Markets. Please go ahead.

Hi, Jason.

Hi; can you hear me? [Inaudible]

Yes. Thank you.

Could you give us some sense of what the partnering environment is like and how it may have changed or evolved over time for immuno [ph] conjugates? I know you’ve put up a couple of interesting collaborations recently. If you could talk about that. And how busy are you in these kind of pre-announced pilot programs for--?

Right. Good question. We continue to these, as you call them, pre-announced pilot programs, meaning that we have antibodies from third parties in house, both existing partners who have multi-target options as well as potential new partners, for whom we are making conjugates using our payload molecules for them to test. I’m optimistic that we’ll see more deals going forward. They may be existing partners or they may be new partners who take licenses to the payload technology. But I think the future is pretty rosy for continuing partnership.

I think that what our financial statements have shown is that the robustness of the partnerships has yielded a fairly stable balance sheet, and that’s important to us. So we’ll continue to find new partners with whom we can enter into collaborations.

And I think-- previously you’ve spoken abut being out there in the market trying to license new antibodies for small molecules of cancer. And just wondering if you’d give us some sense of how that process is going. Obviously, you haven’t really talked much about it today, so can we assume that you’re backing off that strategy to a certain extent?

No, not at all. We think that new targets for different cancers are an important part of our future. And we have been continuing the process of identifying and evaluating new product opportunities around those antibodies. Some of those product opportunities we’re sharing with Aventis in our collaboration with them; some, our own. Some are with universities, for example, who have antibodies of interest to us, and potentially others will come from companies. But that’s a big part of our future.

The focus of greatest interest, on the part of most people that we talk to, however, are the products that are in the clinic. But we’re mindful that the future depends on our ability to feed the pipeline pre-clinically with new target opportunities. And we’re doing just that.

What about bringing in something that’s clinical stage -- phase 2, phase 3-type cancer--

Right; I understand what you thinking. I think that phase 3 products are probably out of reach for us in terms of our financial capabilities. Earlier-stage products are always a possibility. We frankly have not seen any, at least right now, that would make sense both economically as well as from a synergy perspective with ImmunoGen. It’s not to say that there aren’t any out there, and we continue to look for them. It’s a process that we see opportunities that come over the transom, and we go out and encounter opportunities at meetings like ASCO and so forth. So we continue to do that. But I have nothing to report at this time.

Okay, thank you.

Sure.

[Instructions] And we’ll go next to Robert Manning, private investor. Please go ahead.

Could you talk about progress you might be making with other effector molecules? I know you’ve talked about taxines [ph] some time in the past. And whether you consider having a much bigger bunch of arrows in the quiver for effector molecules is important going forward.

I think it is. I think we know that certain tumors have enhanced sensitivity to other types of agents. Most of our works in taxines now is in collaboration with Sanofi-Aventis, since Aventis is pretty much the expert in the area of taxines. They have an active product, taxiture [ph], that generates hundreds of millions of dollars in sales. So they’re quite interested in broadening that platform. And one of the reasons that they entered into an arrangement with us is to collaborate on the development on taxines as effector molecules.

As you know, in house we have a number of agents that we’ve been working on on top of the taxines that include alkilating agents -- DNA alkilating agents -- which to us makes a lot of sense. These are agents which act in an entirely different way than the taxines and the maytansinoids do, which, after all, are both tubulant [ph] inhibitors.

We continue to make progress in that area, but I don’t have anything to report at this time on any conjugates that we have in development that have non-maytansinoid payloads. For now, all our conjugates in development, both those that we’ve spoken of and those that we haven’t yet spoken about, are maytansinoid-based. But we continue to develop, or at least work on the development of, new effector molecules.

Thank you.

You’re welcome.

And at this time, we have no further questions. I would like to turn the conference back over to the speakers for any additional or closing remarks.

I just wanted to wrap up and say thank you very much for attending this conference call, and I look forward to talking to you at our year-end call in mid-August. Thanks again; bye bye.

And that does conclude today’s presentation. We thank you for your participation, and you may disconnect at this time.