ImmunoGen Inc (IMGN) 2007 Q2 法說會逐字稿

Good day and welcome, everyone, to the ImmunoGen second quarter fiscal year 2007 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 Executive Director - Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us on our quarterly conference call. At 4:00 this afternoon, we issued a press release that summarizes our financial results for the second quarter of our 2007 fiscal year which is the quarter ended December 31, 2006. I hope you have all had a chance to review it. If not it is available on our web site at ImmunoGen.com.

During today's call we will make forward-looking statements. Our actual results may differ materially from projections for a number of reasons. We encourage you to review the description of the risks and uncertainties associated with an investment in ImmunoGen that is included in our SEC filing. It can also be accessed on our web site.

With me today are Mitch Sayare, our Chairman and CEO, and Dan Junius, our Executive Vice President of Finance and CFO. Mitch will provide an update on ImmunoGen and Dan will discuss our financial results. We will then open the call to questions. Mitch.

In the past few months we've seen the beginning of what we believe will become an abundance of clinical data on compounds that make use of our technology. Since our last quarterly call we have reported the first findings with our huN901-DM1 in the treatment of multiple myeloma, additional findings with our huN901-DM1 and the treatment of CD56-expressing solid tumors such as small cell lung cancer, the first findings with our huC242-DM4 in its Phase I trial, the first clinical findings with AVE9633 and the first clinical findings with Trastuzumab-DM1 or Herceptin DM1 as people like to call it.

I will take you through each of these, starting with trastuzumab-DM1.

Genentech presented the first clinical findings with trastuzumab-DM1 at the 29th Annual San Antonio Breast Cancer Symposium in December. The data were from their ongoing Phase I trial that evaluates the safety and tolerability of the compound when dosed once every three weeks. To qualify for enrollment in the study, a patient must have incurable locally advanced or metastatic Her2-positive breast cancer.

Importantly the breast cancer must have progressed on a chemotherapy regimen that includes Herceptin. The findings reported were for the first seven patients enrolled. This is a dose escalation safety study. The first dose level, .3 mg per kilogram was evaluated in three patients.

Once it was found to be well tolerated double that dose or .6 mg per kg was evaluated in a single patient. Additional dose doublings, each evaluated with one patient, were assessed up to 4.8 mg per kg. As one would expect the very low doses yielded no obvious clinical benefit but the patient treated with 2.4 mg per kg had marked tumor shrinkage, indeed, a partial response after her second treatment cycle.

Prior to her enrollment in this study, this patient had progressed on a series of Herceptin containing treatment regimens for her metastatic disease. She was still being treated with trastuzumab-DM1 at the time of the conference.

The patient treated with the highest dose, 4.8 mg per kg, had dose limiting but rapidly reversible thrombocytopenia -- a reduction in platelets. At the time of the symposium, enrollment in the study was still ongoing and the maximum tolerated dose had not yet been established. We find these data extremely encouraging and expect additional data will be reported in the coming months.

Some initial data has been reported on AVE9633 as well. As you know Sanofi-Aventis initiated two Phase I trials with this compound, one in the U.S. and one in Europe. The study in the U.S. started first and evaluated the compound when administered once every three weeks. An appropriate schedule for assessing the compound's pharmacokinetics but not a great one for assessing its activity against a highly proliferative cancer like AML.

I would say the most significant result from this first study was that doses up to 260 mg per meter squared could be given without dose limiting toxicity.

The study underway in Europe assesses AVE9633 when dosed weekly for two weeks every four weeks. The findings in the study so far have been characterized as encouraging by Sanofi-Aventis and we are hopeful data from it will be reported sometime later this year either at the European Hematology Association meeting in June or at ASH in December.

In October Sanofi-Aventis advanced the second collaboration compound AVE1642 into Phase I testing. So there is also the possibility that some initial findings on this product will be reported later this year. As you recall AVE1642 was a 'naked' antibody that binds to the IGF1 receptor. No further details on the clinical program have been disclosed by Sanofi-Aventis at this time.

Turning now to our wholly-owned compound starting with huN901-DM1, the first clinical data from our 003 study were reported at ASH in December. As you recall this Phase I trial evaluates huN901-DM1 in the treatment of multiple myeloma when dosed weekly for two weeks every three weeks. The patients in the study have relapsed multiple myeloma and have failed treatment with a number of prior therapies, Revlimid, Velcade and so forth. This is a dose escalation trial and assesses increasing doses of huN901-DM1 in new cohorts of patients.

While the study is designed to evaluate the safety and tolerability of the compound in this patient population, evidence of activity is also reported. Two dose levels have been evaluated at the time of the ASH meeting, 40 mg per meter squared and 60 mg per meter squared. Both were well tolerated so the maximum tolerated dose hasn't yet been established. Interestingly, all three of the patients that received the 60 mg per meter squared dose of product showed evidence of benefit; and one had an objective response.

This patient met all the criteria for an objective response in her fifth cycle of treatment and she received 12 treatment cycles at the time of the ASH meeting. That is 24 doses over 36 weeks and counting since she was still on the drug at that time.

I point this out because frankly we hadn't anticipated that one of the first six patients enrolled in the study would be treated with huN901-DM1 for so long. This is one of the factors that put pressure on our inventory of huN901-DM1 and caused it to have to curtail enrollment in our huN901-DM1 studies, as I discussed in our last quarterly call. Other factors were antibody availability for manufacturing product, shelf life and so forth.

While I am on this topic let me provide a quick update on where we stand with our huN901-DM1 supplies. We have had additional antibody produced and we have changed the product's formulation so we don't expect material availability to be a problem going forward. We expect to restart patient enrollment in our huN901-DM1 studies in the next four to six weeks. We will give top priority to our multiple myeloma study -- the 003 study -- as we believe multiple myeloma is likely the fastest route to market for this compound.

We also have two other huN901-DM1 studies, our 001 and 002 studies, both evaluating the compound and the treatment of CD56-expressing solid tumors. We submitted an abstract to ASCO with the findings to date in our 001 study so we intend to present new data from this trial in June. This Phase II trial evaluates the compound specifically in patients with relapsed small cell lung cancer. It is dosed at 60 mg per meter squared and given weekly for four weeks in a six-week cycle.

This dose is considerably below doses being tested in our 002 study, especially when one considers the total exposure over a six-week period. Our 002 study evaluates huN901-DM1 one dose daily for three days every 21 days. This is a Phase I dose escalation trial in patients with various types of CD56-expressing solid tumors including small cell lung cancer. We reported updated findings from it at the EORTC meeting last November. At that time we had evaluated doses up to 75 mg per meter squared per day, 225 mg per meter squared over three days without encountering dose limiting toxicity.

A patient with small cell lung cancer had a PR -- a partial response -- after treatment with huN901-DM1 and a whole bunch of patients had stable disease. We also provided an update on the patient with Merkel cell cancer who had a complete response to the treatment with huN901-DM1.

This patient was still in CR at the time of the EORTC meeting even though she hadn't received huN901-DM1 in over a year. She had first been diagnosed with Merkel cell cancer back in late 2003, had undergone aggressive treatment for her disease including surgery, chemotherapy and radiation at that time, but it had still reappeared within a year.

I think it's great that at least as of the EORTC she has been in a CR for almost two years because of the treatment with huN901-DM1.

At EORTC, we also reported initial data from our huC242-DM4 Phase I trial. As you know this trial assesses the tolerability and pharmacokinetics of the compound in patients with CanAg-expressing cancers when dosed once every three weeks. At the time of the EORTC presentation we evaluated a broad range of doses and the maximum tolerated dose hadn't yet been established.

We are still assessing this. As expected in a Phase I dose escalation study we encountered some toxicity at the highest dose level, which we believe may be addressable with pre-treatment of the patients. As this Phase I trial determines the dose will be using in our Phase II trial, the start of that study may move into the second half of this year or it may stay in the first half. It depends on how quickly we finalize the dose. We will keep you posted.

We have also submitted an abstract to ASCO with updated findings from the Phase I study and hope to report more updates there. Dan.

Thanks, Mitch, and good afternoon, everyone.

Let me report the results for our quarter ended December 31, 2006 which is the second quarter of our 2007 fiscal year. In the quarter we recorded revenues of $12.1 million which compare with $6.6 million in the same period last year. Breaking that into its components, our research and development support fees totaled $6.6 million in this last quarter compared with $5.2 million in the year ago period.

Remember, this is primarily funding earned under our research collaboration with Sanofi-Aventis. And it also includes revenue earned under our development and license agreements with other of our partners in this quarter principally Biotest and Genentech.

Our license and milestone fees in the 2007 second quarter were $3.4 million. That is up from $1.3 million in the year ago period and includes in the 2007 quarter, fiscal 2007 quarter, a $2 million milestone payment from Sanofi-Aventis which was earned with the advancement of ADE 1642 into Phase I clinical testing. Our clinical material reimbursement -- which is where we make materials on behalf of our collaborators and earn clinical material revenue with a supply of these materials to our collaborators -- was $2.1 million in our second quarter just ended. This compares with $.1 million in the year ago period. The second quarter of 2007 numbers reflect that we supplied significantly more batches and other materials in that period than in the prior year period for reasons related to timing and the amount of material required by our partners.

Our operating expenses in the second quarter of '07 were $15.9 million compared to $11.2 million in the prior period. This includes research and development expenses of $11.8 million against $8.8 million last year. That increase was primarily driven by an incremental $2.1 million for production of our own compounds for clinical testing, and for process development activity in support of manufacturing our compounds and our partner compounds.

Our FY '07 expense also reflects the higher level of R&D support we are currently providing to our partners. These expenses were partially offset by a higher level of manufacturing overhead costs applied to partner batches than a year ago. The cost of clinical material reimbursed was $1.6 million in the just completed second quarter compared to $.1 million last year. This again reflects making more batches or supplying more batches for our collaborators than we did last year.

G&A expenses were $2.6 million in the 2007 period. That compares with $2.3 million last year. That combination led to a $3.8 million loss from operations in the fiscal 2007 second quarter, compared to $4.6 million in the second quarter of fiscal 2006.

We recorded other income of $.8 million in the second quarter of FY '07 against $1.1 million last year. This is primarily interest income in the current period. Last year, it included interest income as well as $.4 million of other income from Vernalis related to our assumption of the cost of completing our 002 study.

The net was a loss of $3 million in the second quarter of fiscal '07 or $0.07 per share compared with a loss of $3.5 million or $0.09 per share in the comparable period last year. The balance sheet continues to show good liquidity with $66.7 million of cash and marketable securities as of 12/31/06. This compares to $75 million as of 6/30/06.

The balance sheet continues to -- the capital base continues to be comprised entirely of common equity with no debts, no convertibles, preferreds, or warrants outstanding.

We used $7.0 million of cash in the first half of fiscal '07. Used in our operations this compares with $4.6 million used in operations in the first half of fiscal '06. In our press release you'll note that we updated guidance for the full fiscal year updating what we had provided in our conference call in August at the end of when we reported fiscal year-end 2006 results. At that time, we estimated our loss for the year in a range of $26 to $29 million and that same range of $26 to $29 million representing our expectation of cash used in operations.

Today we are updating that guidance to a net loss of $18 to $20 million and cash used in operations at the same level -- $18 to $20 million, both substantial improvements from our original estimate back in August. These favorable changes are due to both an increase in the revenue that we see for this year as well as a decrease in the expenses that we are projecting.

The revenue increase is principally due to greater-than-expected partner activity. This includes both increased materials that we are supplying to our collaborators as well as a higher level of research and development support. Our expenses are coming down as we are seeing some changes in the timing of expenses for certain later stage clinical materials. We are also seeing increased utilization of our manufacturing facility because we are making more partner batches which increases the absorption of associated overhead costs. As well as we're getting greater use of previously reserved materials.

The updated guidance does reflect the impact of making more antibody to support our own huN901-DM1 clinical program. That is, we've had some additional expenses related to manufacturing antibody but these increases were offset by larger reductions and projected expenses in other areas.

As the use of our cash is principally used to fund our net loss, the reduction in our projective net loss for the year is the principal driver of the reduction in our projected burn rate. With that I will turn it back to Mitch.

Thanks Dan.

So objective responses have already been seen with two TAP compounds in the clinic with trastuzumab-DM1 in metastatic breast cancer and with huN901-DM1 in small cell lung cancer, Merkel cell cancer and multiple myeloma. We expect more findings to be reported for these compounds in 2007, as well as additional clinical data for huC242-DM4 and, hopefully, AVE9633.

We are not sure about AVE1642 since that just got into the clinic in October. May be too soon for findings to be reported. Either way there potentially could be clinical data on TAP compounds at all the major conferences this year. AACR, ASCO, EHA, EORTC and ASH. Today there are five compounds in clinical testing through us and our partners and there are a whole slew of compounds behind these. Easily 10 just in our collaboration with Sanofi-Aventis, plus additional compounds under evaluation by us and our other partners.

Now not all of these compounds may ultimately make it into the clinic, but we expect another two or three to have compounds to advance into clinical testing in this calendar year 2007. And of course, some of the compounds already in Phase I testing should advance into Phase II during this year -- our huC242-DM4 and hopefully at least one partner compound. And of course we expect to continue to have partner-related announcements.

I look forward to keeping you posted on further progress. Thanks. Carol.

Great. Thanks Mitch. Operator, we're now ready to open the line for questions.

(OPERATOR INSTRUCTIONS) Brian Rye with Janney Montgomery.

Thanks for taking my question.

Dan, I guess, first of all, wanted to ask you in terms of the reimbursement for clinical materials revenue line item that -- you are right it was higher it actually looked like it was as high as it's been in the last five or six quarters. Could you expand on that? Is that due to timing or other issues with multiple partners or is it one major partner that is driving that uptick?

It really runs across a number of partners, Brian. I wouldn't want to break out the components in terms of where that is. But it isn't certainly a single partner in there. I think Mitch has indicated that we're hoping to see additional data. The data is driven by clinical activity and they need material to conduct that. We are looking to see an additional partner initiate trials and certainly they would need material for that. So we're finding ourselves pretty busy.

Secondly, just in terms of the development -- or future development for N901, obviously it looks like the main thrust or the initial thrust in terms of a regulatory path will be in multiple myeloma. For other indications, it sounds like I am hearing less and less direct emphasis on small cell lung cancer and more on perhaps solid tumors in general or others or other particular solid tumors that may express CD56, over express CD56.

Any update on thoughts of potential follow-on indications or how you would expand the development program for that compound?

You are right in pointing to multiple myeloma as a likely rapid regulatory pathway and we are putting some emphasis behind that. We were pretty dazzled by the Merkel cell response; and that continues to attract some attention on our part as to potential solid tumor indications.

Small cell is certainly a disease that is worthy of attention and the great number of stable diseases that we had in small cell, a very aggressive disease. So measuring stable disease is relatively straightforward, leaves us to believe that there is potential there too. We've0 made no formal decision internally as to which solid tumor we are going to go after. We have, however, decided to put some emphasis behind the multiple myeloma at the moment.

In all these indications would you continue to explore it mainly as a model therapy or, given the stable disease that you saw, perhaps in small cell lung cancer, other opportunities in combination with other agents?

Exactly. That is very much on our minds -- how we best make use of this product in solid tumors. Whether it says monotherapy or in combination with other agents. That is, in some cases, informed by preclinical studies that we conducted and are conducting on a variety of different diseases in mice and in vitro -- using our agent in combination with other agents to get an idea of what would be the best approach. But so far that hasn't been decided upon; but we are looking at it for sure.

Thanks again and congratulations on the solid quarter and the continued clinical progress.

Jason Kantor with RBC Capital Markets.

It's Michael Yee in for Jason. Two quick questions. One is, Mitch, you are talking a lot about a fast road to market in multiple myeloma. Can you describe your thinking in terms of a path to market there? Do you think you could potentially run a pivotal Phase II looking at response rates to get to market? The other question was can you confirm if there was anything submitted to ASCO for Trastuzumab-DM1.

Let me begin with the latter. We can't confirm. That's a -- we would not be submitting that abstract. Were there to be one submitted it would be (indiscernible). You would really have to ask them, Michael. I can't help you there.

Multiple myeloma offers a variety of different approaches. And the decision hasn't been made as to whether or not we would do, for example, Velcade failures and focus on that population in a pivotal setting or and exactly what the end points in that study would be. But believe me, it's under heavy scrutiny at this time internally to decide. And when we know again, unencumbered by a partner here, we will be able to talk openly about it. But we are just not at that point yet.

Do think it is reasonable to run a pivotal study there or do you think you need more work looking at different (MULTIPLE SPEAKERS)?

You mean to move into a pivotal study right after this Phase I study? (MULTIPLE SPEAKERS) absolutely uncertain yet. Is it reasonable? Yes. I think it's reasonable but we haven't decided to do that or not to do that.

(OPERATOR INSTRUCTIONS) Pamela Bassett of Cantor Fitzgerald.

Congratulations on a great quarter. I wonder if you can talk a little bit more about the impact of increased production for partners and what that means for the manufacturing facility?

I think how I would couch it, Pamela, is we updated our outlook for the entire year. And while we certainly had a good quarter in the December quarter, tied to what we saw for clinical material reimbursement, that was a factor that allowed us to reduce our expectation of net loss for the year and our cash consumption.

So I think that it's quite a contrast to fiscal '06 when we really saw some -- we didn't see as much partner activity going through the manufacturing facility. I indicated, I think as we came out of fiscal '06, that we expected to see that pick up. We are seeing it pick up. The expectation is that will be sustained through FY '07 and into FY '08 although we haven't started to do a lot of dimensioning for FY '08. But it clearly is a meaningful factor to us in the financial outlook and if we get -- we benefit in a couple of areas. We directly benefit from the revenue that we receive, but because of the nature of it a lot of the fixed costs that we have in our manufacturing facility get absorbed against that revenue. So without significant incremental out-of-pocket expense we are incurring this revenue and it has some very attractive financial benefits to us.

That's great. Thanks for expanding on that. Also, in terms of use of the facility. Is there a lot of potential for expansion there in terms of shifts and also, perhaps, build out if need be or right now, do you think there's enough capacity?

I think at this point (MULTIPLE SPEAKERS). We are busy but we are not anywhere near testing the physical capacity of the facility. We could do a number of things in terms of staffing and the like that would give us additional throughput. So I don't think that at this level or even an increased level of activity we would be looking at significant incremental investment to expand capacity in that plant.

So sort of a follow-on to the multiple myeloma question. If you were to enter into -- if you were to conduct a pivotal Phase II, do you think you would be able to do that comfortably with the current facility?

This is Mitch. These are questions that of course we are thinking about. One would want to use the commercial material or the material that you ultimately use for commercial sale in a pivotal study. And we have never, as you know, viewed our Norwood manufacturing facility as a commercial scale facility. So we would have to entertain a number of possible options here, including devoting, committing a substantial piece of the Norwood facility to pivotal or commercial material.

That is something that we haven't committed to at this time. The alternative, obviously, is to use a third party to manufacture pivotal material for us and we have a thorough -- we've conducted a thorough search about what those third parties might be and what they look like as have our partners. So there's a fairly good idea of what the timing and the expense would be associated with that but we are not ready to make a commitment either way.

Thanks very much.

[Jason Colbert] with Susquehanna.

Hi, Mitch. Just a quick question for you. Trastuzumab-DM1. We know that there is a lot of affinity for that molecule. Cardiac affinity. How do you avoid creating excess of cardiac toxicity while increasing efficacy in breast cancer?

Well, that's an interesting question. You know this would be a question that would be better leveled at Genentech than ImmunoGen since we really can't get ahead of them in the disclosure of data. But thus far in this study, no reports of cardio toxicity have been made that we are aware of and thus, it may be that the cardio toxicity that is seen with the naked protein molecule Herceptin comes about from a different mechanism than that which makes the conjugate active.

But that's pure speculation, Jason. I really don't know. Suffice to say that we've had no reports of cardio toxicity.

Thank you.

That will conclude today's question-and-answer question. At this time I would like to turn the conference back over to Carol Hausner for any additional additional or closing remarks.

Thank you all for your interest and if any additional questions come to mind please give me a call at 617-995-2500 and have a good evening. Take care.

Thank you for your participation. That does conclude today's conference. You may disconnect at this time.