ImmunoGen Inc (IMGN) 2006 Q1 法說會逐字稿

Good day and welcome everyone to the Immunogen first quarter fiscal year 2006 conference call. Today's call is being recorded.

And at this time for opening remarks and introductions, I would like to turn the conference over to the Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Thank you Melissa. Good afternoon, everyone. And thank you for joining us on our quarterly conference call. At four o'clock this afternoon, we issued a press release that summarizes our financial results for the first quarter of our 2006 fiscal year. I hope you have all had a chance to review it. If not, it can be found on our website at Immunogen.com.

During today's call, we will make forward-looking statements, our actual results may differ materially from the projections made, descriptions of the risks and uncertainties associated with an investment in Immunogen are included in our SEC filings, which can also be accessed through our website. With me today are Mitchel Sayare, our Chairman and Chief Executive Officer and Dan Junius, our Senior Vice President of Finance and Chief Financial Officer. Mitch will provide an update on Immunogen, and Dan will discuss our financial results. We will then open the call for questions.

Mitch?

Thanks Carol. We're off to a strong start for our 2006 fiscal year. Our huN901-DM1, multiple myeloma study is up and running. We are making solid progress with the two studies underway with this compound in small-cell lung cancer, and we will report from one of these studies, at the EORTC meeting in a couple of weeks.

We are also making significant progress in the clinical study on our HuC242 - DM4 compound. We will be presenting data supportive of our TAP technology at the upcoming EORTC meeting, as will our partners.

And we continue to have important endorsements of our capabilities by our partners. Let me take you through these in more depth. We will begin with huN901-DM1 patients, those things underway in our clinical trial assessing this compound for the treatment of multiple myeloma. The study is being conducted at the Dana-Farber Cancer Institute and additional centers are coming onboard. So, we can complete patient enrollment as quickly as possible because we have so much experience with huN901-DM1 small-cell lung cancer. We were able to start dosing at 40 mgs per meter square rather than the much lower doses typical of a Phase I study. As you know, this study is being conducted in patients with CD56 positive multiple myeloma that have failed at least one prior treatment. So, they may be, but don't have to be Velcade failures.

As I said earlier, we are also making good progress with the two trials accepting huN901-DM1 in small-cell lung cancer and will report the first findings from the study initiated in the UK at the EORTC meeting later this month. Actually, although this study was started in England, it's now running in the US, as well indeed several sites have been added here to accelerate patient enrollments. In the study, patients with small-cell lung cancer and other CD56 expressing solid tumors receive huN901-DM1 daily for three days in a row every 21 days. Encouraging Phase II data from our weekly dosing study were reported that May at the ASCO Annual Meeting and that trial has been expanded in size. And over the past few months, we have substantially increased the number of clinical centers participating in this study. Our goal is to complete most of the patient enrollment by the end of our fiscal year in June. I noted that we will be presenting clinical findings with huN901-DM1 at EORTC in a couple of weeks. We have three other poster presentations there as well, including data on the impact on human tumors of combining huN901-DM1 with other agents commonly used to treat small-cell lung cancer. We will also present animal data on huC242-DM4, the next compound I will talk about.

In June, we announced the initiation of patient dosing with this compound at the CTRC in San Antonio. In the Phase I, study huC242-DM4 is administered to patients with CanAg, expressing cancers, the target for this peptide compound. Accrual is good and we look forward to reporting findings from the study when it's at the appropriate stage. Our goal is to complete most of the enrollment by the end of our fiscal year in June. You may recall that our business model is to develop our own products and minimize the cash we consumer in doing so by out-licensing our TAP technology to other companies for use with their antibodies. One of the benefits of having partners that use our technology in addition to reducing our cash burn is that it increases the number of TAP compounds in development that can generate data supportive of our technology. Thus in addition to the four posters we will have at EORTC, three of our partners who will present a total of five posters on TAP compounds. Four of these operations preclinical data and the fifth by Boehringer Ingelheim will show clinical findings with visitors in maytansinoid (ph) for the first time. Even though visitors of maytansinoid is no longer in development, the clinical result definitely merit presentation. In terms of other upcoming presentations, it's worth noting that Millennium stated during their Analyst Meeting yesterday that they we expect to report additional clinical data on MLN2704 during the first half of 2006 and to make a next step decision regarding this compound in that time frame. One very visible partnering development since our last quarterly call was sanofi-aventis' commitment of $18.2 million to extend the duration of our research collaboration to a fourth year. As you know, this collaboration was originally established with Aventis Pharmaceuticals and there was some concern on Wall Street on how the merger of Aventis and sanofi would impact ImmunoGen. I think, the Street took some comfort when sanofi-aventis advanced the lead collaboration product huMy9-6-DM4 in the clinical testing earlier this year. Sanofi-aventis' extension of our research collaboration and the funding commitment that goes with it clearly shows that our scientific contribution to this collaboration has withstood internal scrutiny. We are also pleased that they formally identified a name to three compounds they licensed from us during their recent analyst meeting. As a reminder, these are Hu996- DM4, which they call AVE9633. The anti-IGF1 receptor naked antibody, which they call AVE1642, and the anti-CD19 TAP compound for B-Cell malignancies, which they call SAR 3419. The first of these is in clinical testing as you know. The other two advancing in their preclinical pipeline.

So Dan will now discuss our financial results. Dan?

Thank you Mitchel. Good afternoon everybody. Revenue for the first quarter ended September 30, 2005 was $7.8 million compared to $9 million in the same period last year. Research and development support revenue of $5.6 million was up nearly $1.6 million from the comparable period a year ago. Contributing to this increase was approximately $1.1 million in revenue from research activities performed in our fiscal 2005 under the Sanofi-Aventis agreement that we identified and recorded during the September 30, 2005 period. These activities were identified as part of a review performed on the completion of the second year of our collaboration and our build to (ph) to Sanofi-Aventis under the terms of the contract.

Clinical reimbursement revenue was $831,000 in the first-quarter of fiscal 2006, compared with nearly $2.9 million in the same period last year. While the same number of partner products went to clinic in both periods, our clinical material reimbursement revenue fluctuates significantly from quarter-to-quarter because of such factors as the number of clinical trials being conducted by our partners, their scale and duration.

During our first-quarter 2005, we made large quantities of bivatuzumab mertansine for Boehringer Ingelheim's clinical program. As you know, development of this compound ended in February 2005, so no bivatuzumab mertansine was produced during our first-quarter 2006.

License and milestone fees of $1.3 million were recognized in the quarter, compared with $1.5 million in the prior year, when we earned a milestone from one of our collaborators. Development fees in the first quarter of fiscal 2006 were $41,000 compared with $510,000, in the comparable year-ago period. These fees represent reimbursement for research grade, preclinical materials and process development work and vary significantly quarter-to-quarter.

The company's loss from operations in the first-quarter of fiscal 2006 increased to $5.4 million, from $2.8 million in the prior year. Operating expenses rose to $13.2 million, in the December 2005 quarter, from $11.8 million, in the first-quarter of fiscal 2005. Included in the results for fiscal 2006 is $610,000 in stock compensation expense associated with our adoption of SFAS 123 R, as of July 1, 2005. While the cost of clinical materials was less in our first-quarter 2006 as a result of less materials supplied to our collaborators, the reduced volume adversely impacted overhead absorption in the quarter, which along with added personnel and stock compensation costs contributed to higher research and development costs in the quarter than in the same quarter a year-ago.

General and administrative expenses of $2.8 million rose in the first quarter of 2006 from $1.7 million in the comparable period of 2005 due to the adoption of the new stock compensation expense accounting standard, higher patent expenses associated with filings and additional jurisdictions, and increased personnel.

Other income increased to $716,000 in the September 30, 2005 quarter from $368,000 in the prior year, benefiting from higher interest rates. Our net loss on the first quarter of 2006 was $4.7 million or $0.11 per share, compared to a loss of $2.5 million or $0.06 per share in the same period last year.

Cash and marketable securities totaled $86.8 million as of September 30, 2005, compared with $90.6 million on June 30, 2005. This reflects $3.5 million in cash used by operations driven principally by the net loss, and $500,000 in capital expenditures. These uses were partially offset by proceeds in stock option exercises. The company generated $900,000 from operations in the same period a year-ago, with cash generated from working capital, offsetting the net loss in the period. I should add that, we continue to have no debt.

Our guidance for fiscal 2006 remains unchanged from what we communicated in our last conference call. A net loss for the year of between 17 million and $19 million inclusive of the impact of SFAS 123 R, which we now estimate at $2.4 million for the year. Recall that we indicated that our expenses would be greater this year than last because of increased clinical trial activity along with costs associated with development works to prepare to produce, pivotal trial rate material for our compounds.

Cash used in operations continues to be estimated in the range of 16 million to $19 million, with an additional $4 million for capital expenditures.

I will now turn the call back over to Mitch.

Thanks Dan. Over the course of the coming years, driven by announcements made by us and by our partners, I believe that interest in antibody drug conjugates will increase substantially. Of course it's parallel to the growing recognition of ImmunoGen as a leader in this high potential field by companies that have tested our technology and assessed our capabilities. After all, more companies have committed more money to access our TAP technology and work with our scientists than with any other antibody drug conjugate company. Our partners know we've got what it takes, that we can successfully develop an antibody drug compound to optimize this performance, and advance it from the lab bench to the clinic. We also have clinical data from hundreds of patients supporting the safety of our technology. We have successfully advanced our own antibody-drug conjugate into the clinic. Our partners have successfully advanced antibody-drug conjugate into the clinic and multiple TAP compounds are in preclinical development. So we believe our claim to leadership is supported by achievements, and this leadership will become increasingly apparent in the coming months. We look forward to updating you on our progress. Carol?

Thank you. Operator, we are now ready to open the line for questions.

[OPERATOR INSTRUCTIONS] Jason Kantor, RBC Capital Markets.

It's actually Michael Yu (ph) for Jason. Thanks for taking the question. I guess two questions, one is, Mitch, you were talking about partnering activities, can you talk about what the current environment is like and especially with the recent developments in the space you have Medarex, and now talking about their conjugate activity and saw Cambridge Antibody acquiring some conjugate, do you expect to get another partner this year or are you increasingly more focused on clinical development now, maybe recently business development?

We haven't given guidance on partners though we see no dimunition of interests. As I said before, Michael, at any one time, we have several antibodies in-house from other companies that we make conjugates of and are giving back to those companies for their testing. So at any time, we could be entering into an agreement to license our TAP technology to another company but again we haven't given guidance as to when and how many.

Can you talk about what you guys are doing, maybe accelerate your partners preclinical development processes, maybe why there are -- what points do you guys actually collaborate within the different points in the process, and do you expect to have a partner take something into the clinic within the next 9 to12 months? Maybe you've indicated that earlier?

We have indicated that we expect another partner to bring a product into the clinic at some point in the reasonably near future. Our efforts, our participation with our partners are really in four different levels. In addition to the revenue that we get from milestone money and upfront fees, we manufacture clinical grade product for all of our partners, where they are clinical testing as well as, their preclinical testing, so it's just to make that clear. So they can't do the preclinical testing, if they need to do, for filing an IND without materials that are produced by us. We then also develop the process that is used for manufacturing the material for preclinical and Phase I studies that ultimately we use as a basis for manufacturing products for them. So, our hands are in the pot, so to speak throughout the course of the preclinical and early clinical developmental of products for our partners.

The costs of goods so high this quarter, did you indicate that that was mainly because of the low volume and high fixed costs expense kind of what's going on in this quarter?

The cost of goods relative to last year.

But just in the quarter you had, you know, the cost of goods were actually more than your manufacturing revenue coming into this quarter?

Well, yes, there were a couple of things going on. Some of it was adjustments from a cost standpoint, in terms of standards changing, so we had to make and adjustment there that increased the cost. It was relatively minor. But you are right, but it was one-time items Michael, that impacted as opposed to anything structural.

[OPERATOR INSTRUCTIONS]. Jason Colbert, Derby Capital (ph).

Question for you on HU901 - DM1, can you talk a little bit about exactly where that is in terms of dosing and what you think the next event will be for that to progress?

There are three Phase I, and Phase II clinical studies ongoing with that product. The multiple myeloma study, as you know recently began. The only thing that we have said about dosing in that is, that it is proceeding, and starting to -- it's a sporty mix for me to square it. The Phase II study that is ongoing in the US, dosing patients once a week for four weeks to every six weeks, is dosing in the range of 65 mix for me to square it. And, we have not updated those datas since the presentation last summer at ASCO. And finally, the UK based study that is now extend to the US, in which patients were dosed every day for three days, every 21 days, we haven't disclosed what those dosage levels are, but they will be disclosed until we study ORTC (ph). So if you can wait till then, you will have a good handle on what the product looks like, in that dosing schedule of those doses.

If the data looks good, what is the profit like for this to move into a Phase II expanded trial?

There's a bunch of different ways that that could be approached. From a study on a very small disease and there are a number of those in which the CD56 is expressed, for which the standard of care doesn't exist today. To name one, cautionary for example, is an example of that. To myeloma, which after all is proceeding nicely, in Dana Farber and elsewhere, and is a blood-borne disease. So I think that we need to make an assessment of all of those data before we commit to one route or another for regulatory approval. But take my word for it, it's on our mind. I mean it's right up front on our mind.

I can see that you are going to have different waves of data coming from different trials, I am just wondering how you make a pro see decision when you get one set of data significantly ahead of the other trials?

We will keep you posted on that when that happens. I mean so far, the data that are coming in are Phase I data. The Phase II data that we reported at ASCO who was on 13 patients, we need to fill out the rest, you know, we need to go to 35 in our study, which we're doing now. And hopefully we will be there by the spring, by ASCO time. So I think, I don't want to give a date as to when we will make those sorts of decisions, we need to see some of these data, what they look like to determine which would be the best disease to focus on for regulatory approval.

I have a question for you also on the Millennium 2704, at the analyst day, the other day, Millennium seems to be backing off, a year-end decision, and I think I caught you talking about a possible decision in a few months. My feelings for Millennium was that they are very concerned about toxicity, and it's not clear to me that there's going to be a Phase III decision any time soon. Do you have any read on what they are doing on 2704?

We have the same information that you do. My reading -- I mean I just read the transcript of the analyst day presentation yesterday. So I don't know that --

Well, a lot of this was in the side bar conversation.

Okay. Well the transcript says that, yes, they did see some toxicity. They are determining how broad the therapeutic window is, and that they expect it to make a next step decision after the year -end. So it's not by the year-end, which at this point. But after year-end, sometime probably first half of '06. But, beyond that, I don't know. But that's what they said.

Fair enough, thanks.

Sure, any time.

Brian Rye, Janney Montgomery Scott.

In terms of going back to the N901 study in multiple myeloma, even though it is Phase I, will I be correct in assuming that there will be a bit of a subset analysis since there are people who either have or have not taken Velcade, so will be able to judge and take a look at any sort of signal, or biologic activity, any set of patients?

I wouldn't rule that out but it is not a specified part of the protocol. I mean, the idea was to take all comers who are suited to fixed positive and maybe they will all be Velcade failures. In which case there won't be a subset, in other words it wasn't structured in such a way that take or whatever. But, if the data and numbers of patients merit that kind of analysis, certainly we will do it.

A little more of a conceptual question, one of the company's partners that we don't usually hear too much about is Abgenix, and I was just wondering given the positive panitumumab data they released today and the applications that at least conceptually has for their future growth prospects, I'm curious if you have any insight into whether or not, they will be looking to expand their own pipeline activity internally, which might have some implications for you guys in your partnership with them?

We have a good working relationship with Abgenix, but we need to take the lead from them, as to what sorts of things are disclosed. And so far, I don't think they've disclosed very much at all about our relationship with them.

Fair enough. Thanks, Mitch.

Sure, any time Brian.

Any further questions Mr. Rye?

No. That's it, not from me.

[OPERATOR INSTRUCTIONS]. Mark Monane, Needham & Co.

Drugs that are tested in clinical trials as you are so precisely doing, and monotherapy, but they are used in the real world in combination. I know that we're going to see some data at WACR-EORTC coming up, but maybe you can go over with us, your thoughts about which agent might make the best choice given the mechanism that we know exists right now for your lead product?

The data that we will be presenting in the EORTC describes what happens when you mix HuN901-DM1 in combination with the standard of care for small-cell lung cancer. We generated some data which we published a few years ago with taxanes, which of course as you know are not the standard of care, where we so profound synergy between the actions of huN901- DM1, and taxanes. This was xenograph models in animals of course but, those things at the MTB taxanes adds just a little bit, 20% to the MTB of our product that cured all the animals. Whereas taxane alone had barely any effect on the tumor load. So, it's on that background that we proceeded with the studies that we will present in a few weeks at EORTC, and unfortunately, as you know, gun jumping is not permitted. So I can't disclose what those data say but they are really quite interesting.

Do you find that, while sequencing, be it something to look forward to, meaning the order of the medication?

Yes, I mean I think that's an important part of it.

And at this time we have no further questions standing by in our question row. So, I'd like to turn the conference back to our speaker, for any additional closing comments.

No, I just wanted to thank everybody for attending this conference call, and we appreciate your attention and will be happy to repay it by answering any questions you might have on phone calls. So, by all means, give us a call if you do. Thanks very much.

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