ImmunoGen Inc (IMGN) 2007 Q3 法說會逐字稿

Good day, everyone and welcome to this ImmunoGen third quarter fiscal year 2007 conference call. As a reminder, today's conference is being recorded. 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 ma'am.

Thank you. Good afternoon, everyone, and thank you for joining us on our quarterly conference call. At 4:00 o'clock this afternoon, we issued a press release that summarizes our financial results for the third quarter of our 2007 fiscal year, the quarter ending March 31st, 2007. I hope you've all had a chance to review it. If not, it's available 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 be accessed through our website. With me today are Mitch Sayare, our Chairman and Chief Executive Officer; Dan Junius, our Executive Vice President of Finance and Chief Financial Officer, and John Lambert our senior vice president of pharmaceutical development and acting head of research.

Mitch will provide an update on ImmunoGen and Dan will discuss our financial results. We'll then open the call to questions. During the Q&A session, John will be available to answer questions as well as Dan and Mitch. I'll now turn the call over to Mitch, Mitch.

Thanks, Carol, good afternoon. We're making significant progress in the development of our owned clinical stage compounds and expect to begin a Phase II study on our HuC242-DM4 compound very soon. In the coming months, we also expect to have the HuN901-DM1 clinical data we need to finalize the next steps in its clinical development as well. On top of all this, our partners are making good progress with their clinical stage compounds, and we expect additional TAP compounds to advance into the clinic this year.

As some of you have commented on, there's been considerable buzz around antibody-drug conjugates recently, stemming in large part from the enthusiasm Genentech recently expressed for therapeutics that make use of tumor targeting antibodies to deliver toxic payloads to cancer cells.

We're delighted that this leading oncology company now considers payload enhanced antibodies to be one of the key ways to attack cancer. We're particularly pleased that Genentech gave such prominence to trastuzumab-DM1 or Herceptin DM1 as people call it, in their March 23rd investment community meeting. And that Art Levinson discussed trastuzumab-DM1 in his opening remarks.

As you know, trastuzumab-DM1 is a TAP compound that makes use of our DM1 cell-killing agent and SMCC linker with Genentech's trastuzumab or Herceptin antibody. Trastuzumab-DM1 is currently in Phase I testing, and in their March 23rd meeting, Genentech gave the investment community a taste of the findings they'd seen to date.

Genentech's Phase I program evaluates trastuzumab-DM1 in patients with incurable HER2 expressing metastatic breast cancer that has progressed on treatment with a chemotherapy regimen that includes Herceptin. That is, it evaluates trastuzumab-DM1 in patients with breast cancer that expresses HER2, but isn't responsive to Herceptin plus chemotherapy.

Genentech disclosed that 18 patients had received trastuzumab-DM1 to date in Phase I. They showed CAT scans demonstrating marked tumor shrinkage and reported that, and I quote, "Sustained anti-tumor activity has been seen in multiple patients at or below the maximum tolerated dose." So it sounds promising. We expect Genentech to report more details on their clinical findings at ASCO on June 2nd.

We have less to report about Sanofi-Aventis' AVE9633 and AVE1642, both of which are in clinical testing. Sanofi is making meaningful progress, but isn't as communicative with the investment community as Genentech is about earlier stage clinical programs.

AVE9633 is in a second Phase I study that evaluates a more frequent dosing interval than that used in its first Phase I study. The only color we can share with you at this time is that the findings to date in this study are encouraging. And we're hopeful they'll be reported at the ASH meeting in December.

AVE1642 only began clinical testing last October, so its early days for this compound. However, it was disclosed in a poster at AACR that it's being evaluated in multiple myeloma. So it's possible there'll be clinical data reported on it at ASH this December as well. We'll keep you posted on when findings will be presented.

Turning now to our own clinical stage compound, starting with HuN901-DM1, we're enrolling patients in our 003 study, which evaluates the use of the compound for treatment of relapsed multiple myeloma. This is our highest priority HuN901-DM1 study, since we believe multiple myeloma offers the fastest route to approval for this compound. We reported interim findings at ASH last December that show that all three of the patients who received the highest dose evaluated at that time had clinical benefit, and one even had an objective response.

We've continued to dose escalate and expect to report updated findings at ASH this December. We're seeing a lot of enthusiasm for this study among clinical investigators and continue to get lots of patients applying for enrollment. As we gather more data from this study, we'll finalize our plans for the next steps in development.

Our second highest priority for HuN901-DM1 is our 002 Study, evaluating the compound for relapsed small-cell lung cancer and other CD56-expressing tumors when dosed daily for three days every 21 days.

We reached 75 milligrams per meter squared or 225 mgs per meter squared over three days without encountering dose limiting toxicity, and we plan to dose escalate further. Let me say a few words about this. 225 mgs per meter squared in a 21-day cycle equates to over 400 or equates to just about 450 mgs per meter squared over the course of six weeks. I note this, because it's the primary reason we're giving our 002 study priority over our 001 study, which also evaluates the compound in small-cell lung cancer. You may recall that in the 001 trial, patients received 60 mgs per meter squared of HuN901-DM1 weekly for four weeks every six weeks, so that's 240 mgs per meter squared over the six week cycle, considerably less than in the 002 study.

We're stuck with the 60 mgs per meter squared doze in the 001 study since this was the MTD, the maximum tolerated dose established in the Phase I portion of the study, although it isn't a bad dose. In fact we've reported objective evidence of anti-cancer activity from this trial at an earlier ASCO meeting, and it will be an abstract at ASCO next month with updated data. However, it isn't as high a dose as we reached in our 002 study.

We'll resume patient enrolment in our 002 study and then in our 001 study as our inventory increases and we're confident that we have sufficient clinical materials to support these studies while continuing to fully support our 003 trial. We're also making solid progress with HuC242-DM4, and remain on track to start Phase II testing with it very soon. Our first Phase II study will be in patients with metastatic or locally advanced gastric cancer that failed to respond to a frontline chemotherapy regimen.

We selected gastric cancer for several reasons. First, patients with the disease have few treatment options, thus enabling us to study HuC242-DM4 as a single agent in a second line position. If we were to try the study of the compound now in say colon cancer, it couldn't be given to patients until after they had failed all of the many approved treatments for the disease. We want our first Phase II study with HuC242-DM4, to test the compound as a single agent, as it's faster, to develop a compound that has been shown to have meaningful anti-cancer activity on its own.

Second, the current frontline options for gastric cancer have limited efficacy and are highly toxic, so there's a significant need for better therapies for this tumor. The American Cancer Society expects about 21,000 new cases of gastric cancer to be diagnosed in the U.S. this year. And over 11,000 people are expected to die from the disease this year.

And finally, in our pre-clinical studies, gastric cancer was highly sensitive to HuC242-DM4. We expect to start patient dosing in June or July, and will announce the start of the study when we do.

Since we're now discussing Phase II testing of HuC242-DM4, you may be wondering what's happened with the Phase I study that's been underway? It's still underway, and we'll report updated findings from it at ASCO on June 3rd. We feel that the study has already accomplished much of what we needed it to.

We determined that HuC242-DM4 is well tolerated at doses that should demonstrate meaningful anti-cancer activity in a sensitive patient population. But the patients in the Phase I study have such refractory cancer, that they're unlikely to respond to any agent, no matter how good. And we want to get the compound into a patient population where its efficacy can be really assessed.

Turning now to earlier stage compounds, in addition to the five product candidates already in clinical testing, there is a number of other compounds advancing toward the clinic, and we're now confident that two more TAP compounds will begin Phase I testing in 2007 through our partners. We'll disclose what each one is when we announce that a milestone payment has been earned. We're quite pleased with the activities under way at our partners and supportive collaboration programs which complement the work we do in support of their compounds.

I'm particularly pleased with the plans we have in place for the evaluation of our own clinical stage compounds, and with the work we're doing in support of our product pipeline and technology portfolio; all in all, a lot is going on. And Dan will now discuss the financial results, Dan.

Thanks Mitch, and good afternoon everyone. Let me go through the results for the quarter ended March 31, 2007, which is the third quarter of our 2007 fiscal year. Revenues in the quarter were $9.8 million, which is up from $9.4 million in the quarter last year. Comprising that we had research and development support fees of $6.6 million, which compares with $5.3 million a year ago.

Recall, this represents primarily funding earned under our research collaboration with Sanofi-Aventis, but it also includes revenue earned under our development and license agreements with other of our partners, principally Biotest and Genentech in the quarter just ended.

License and milestone fees were $1.5 million, which is down from $3.3 million last year. In the year ago quarter, we included -- we reported $2 million in milestone payments from Genentech, which were earned under IND acceptance for trastuzumab-DM1.

Our clinical material reimbursement in the quarter was $1.8 million, which is up from $0.8 million a year ago. Here we make clinical materials on behalf of our collaborators and earned clinical material reimbursement revenue with the supply of materials to our collaborators. The Q3 2007 numbers reflect that we supplied significantly more batches in cytotoxic DMX in Q3 2007 than Q3 2006.

For the Q3 2007 quarter, our operating expenses were $15.8 million, that's up from $13.2 million a year ago. For the components there, our research and development expenses were $12 million, which is up from $10.2 million last year. Included in here's an increase in salary and related expenses of $1.2 million, that reflects greater R&D activity on both new and ongoing collaborative programs, as well as about $0.5 million in severance cost due to the departure of two senior employees.

The increase also includes $600,000 in development cost of CMOs for potential production of later stage materials and the purchase of research grade materials. Our cost of clinical material reimbursed was $1 million in the third quarter of 2007 compared to $800,000 in the quarter a year ago, this reflects both higher batch cost and increased volume from last year.

G&A expenses were $2.8 million, against $2.2 million last year. This increase is primarily due to increases in patent costs, salary and related expenses and legal fees. This led to a loss from operation of $6 million, that's greater than the $3.8 million we lost in the quarter last year. Other income, which is primarily interest income, was flat at about $800,000 and that led to a net loss in the third quarter of 2007 of $5.2 million or $0.12 a share compared with $3 million or $0.07 a share in the third quarter of 2006.

In terms of our balance sheet, we ended the quarter with $64 million of cash and marketable securities, this compares with $75 million at the end of our fiscal year in June of 2006.

Our capital structure continues to be all common equity, there was no debt, no convertibles preferred or warrants. We used $11.5 million of cash in operations in the first nine months of fiscal 2007. That compares with $7.1 million in the first nine months of fiscal 2006.

Our guidance was updated last quarter to indicate a expected net loss for the year of $18.2 million in cash used in operations, also of $18 to $20 million -- and our cash used in operations also to be between $18 and $20 million. That was brought down from a much higher number that we gave when we started the year.

And at this point of time, looking at out expectations, the actual nine months and our expectations for the balance of the year, we would keep our guidance to that level. That is a net loss of $18 to $20 million, cash used in operations at the same level.

Let me now turn it back to Mitch.

Thanks Dan. As you can tell we're really excited about the progress we are making and that's being made by our partners. So what to expect over the coming months?

We expect to announce by mid-year the start of patient dosing in our Phase II study, with HuC242-DM4 in gastric cancer.

Also we'll report updated data from its Phase I study at ASCO next month. We also expect to report the next steps in the development of our HuN901-DM1 compound in 2007.

Updated findings from our high priority 003 study are expected to be presented at ASH in December, 001 study in small cell lung cancer will be in the form of an abstract next month at ASCO and our higher priority 002 study may be presented at EORTC in the fall.

Genentech will report Phase I clinical data for Trastuzumab-DM1 at ASCO next month. Hopefully Sanofi-Aventis will report initial finding with AVE9633 and AVE1642 at the ASH meeting this December.

And finally, we expect two additional TAP compounds to advance into clinical testing through our partners. I'd look forward to keeping you updated in our progress as we move forward. Carol.

Great, thanks Mitch. Sarah, we are now ready to open the call to questions.

Thank you. (OPERATOR INSTRUCTIONS). We'll take our first question from Brian Rye at Janney Montgomery.

Well, good afternoon, and thanks for taking my question. Mitch, just a couple of things this afternoon.

First, more of a housekeeping item, I wanted to make sure that I understand that the manufacturing issue that had been affecting patient enrollment, new enrollment in the N901 studies, if that's been fully resolved.

And then secondly, sort of broader question, in looking at the potential commercial landscape for C242-DM4 in gastric cancer, obviously, initial Phase II will be as a monotherapy in a second line setting. But given that there is nothing approved, do you envision yourself trying to create a new treatment paradigm in combination with either the existing drugs that may be used but are somewhat toxic as you said, or would you want to maybe combine it with something new, whether maybe some existing synergies that you may have seen in a preclinical setting or hypothetically given the mechanism of action with 242-DM4.

Let me start with the second one first Brian, thanks for the questions. I'll make you the promise that we will discuss what our actual regulatory strategy is beyond the gastric Phase II monotherapy that we've -- that I've just described, fairly soon.

You know, we have no partner to censor us on what our plans are, and we do have a plan that's just in development, but we would like to see some data first from the gastric monotherapy before we make that decision.

If the data are really good, it might change our way of approaching regulatory approval than if they were just less than really good. So we are very excited about this, we expect to see those data relatively quickly after we initiate the study in June or July, and we'll keep you posted.

But I promise we will disclose that in a very timely method. I understand that it's important to the Street. It's also important to us to get that information out there. On the first --

Okay and the impact -- I'm sorry, if I could stop you there and just a follow-up on that quickly first, if you -- are you able to disclose the number of patients, that sort of thing, any logistics about the trial itself?

Yes, I will tell you what, we will disclose that information once this trial starts, shortly after the trial starts or at the time the trial starts we'll disclose exactly what the plan is.

Fair enough, Mitch.

Okay, good. On the supply for N901-DM1. We have plenty of drug, we are not feeling a 100% comfortable with the inventory, given the rapidity with which 003 is being accrued right now to jump into 002 and 001 in a big way.

We just need a little bit more inventory under our belts. The issue isn't manufacturing of the conjugate. The sole issue is the delivery of naked antibody, from which we make the antibody conjugate. And that's underway, shouldn't be a problem, we're working hard at it. So I don't expect there to be much of a restriction at all, on 002, or even 001, as we move forward with 003.

You know, one of the issues is that I won't go into too much detail now about where we are in the myeloma study, but you know, patients who stand on the study for a long time, way longer than we anticipated for the supply, and even with the additional rate of accrual of the inventory of product, the numbers of patients that continue on study is definitely a pressure. So we're pleased with that, don't misunderstand me, we're very pleased that patients are having benefit from the drug, obviously, otherwise, they wouldn't be on the study, but it does put some pressure on 001 and 002.

Sounds like a good problem to have, thanks Mitch.

Welcome.

Take our next question from Jason Kantor, RBC Capital Markets.

Thanks, so couple of things. Did I just hear you correctly that you're basically telling us that patients are responding well in that myeloma study?

No, I didn't actually say that and I wouldn't say that Jason, as you know. What I did say is that they're staying on the study for a long time. In order to qualify for continued dosing, they have to have shown -- there has to have been shown some clinical benefit, as it is with every Phase I study, to continue dosing. So that's all I'm saying.

And are those patients progressing at the time that they enter or, I mean, are they just -- these could be stable disease patients?

Well, no, I mean, these -- the patients that go -- that qualify for the study are suffering from relapse from refractory disease. So no, they're not stable at that time. No, I mean, we believe it's the benefit of the drug, but I can't prove that statistically or anything else and you'll see the data hopefully at ASH, and you can decide for yourselves.

Okay, and my second question, I know it's a small component here, but your revenue from partners in terms of the clinical material that you're giving -- you're selling to them, looks like the margins on that, went way up relative to what it's always been, is there -- is that just a timing issue or is that a product mix issue or different kind of contracts, what explains that?

Jason, its Dan. There's an underlying issue there. Recall back, I think it was in 2004 and 2005, the Company wrote off some of its inventory according to its policy, we wrote down the value of DMX. And what happened is we're now using that DMX both in batches as well as we do supply that as a raw material to partners for their own use.

And so when we do that that goes through our books, we recognize the full amount of revenue, but there's no accompanying cost. So it's -- I would not characterize it as an increase in margin, it's a distortion in timing, and that we took that cost several years ago, we're now benefiting from that as we sell it.

And how much more of that do you have -- can we expect the same sort of situation next quarter and the quarter after or is this this one time, now you're done with that.

No, well, there still is some material. I wouldn't want to tell you quarter by quarter, we will continue to benefit from this for a period of time, unfortunately, not eternally.

Okay, thank you.

You're welcome.

(OPERATOR INSTRUCTIONS). Next, we'll hear from Pamela Bassett, Cantor Fitzgerald.

Hi, thanks for taking my call, lot going on. Can you talk a little bit more about the kinds of -- what will be moving in to clinical testing with collaborators, are we talking about advancing into Phase II or are we talking about brand new Phase I trials, and also -- if you could also talk a little bit more about the design of the study that will start mid-year in multiple myeloma.

Pamela, its Mitch. I'd be happy to do the latter, but we're going to do it when we announce the study has begun. I think it's probably the appropriate time. And it -- that preserves the sanctity of our relationships with the academic institutions that are actually accruing patients until that time.

And Pamela, you meant in gastric cancer, not multiple myeloma, I think, right.

Oh, I think that's what I would interpret it as.

Okay, I did, I apologize, yes, sorry, sorry.

Just wanted to be clear.

Okay, good, thanks.

Sorry about that.

So, to answer your first question, yes, on both. So the question is are we talking about Phase I studies or Phase II studies going forward? We expect two new TAP products to enter the clinic this year, that's new, so its' not existing products moving to Phase II. However, as was reported on March 23, Genentech has announced that they intend to make a Phase II decision regarding Herceptin-DM1, trastuzumab-DM1 this year. So if that decision is favorable, then obviously that product will move in to Phase II as well. So in that on top of our own gastric cancer study which begins in the summer, so --

And did Genentech say -- give a timeframe about their decision?

Yes, they did, they just said 2007, which is seven months more of 2007, so I can't say when it's going to be.

Right.

Then if I knew and I could tell you, I would, I actually don't know.

No, I just -- I -- yes, okay. All right, thank you.

You're welcome.

I have no further questions at this time. Carol, I'll turn the conference back over to you for any additional or closing comments.

Lovely. Thank you very much and I want to thank all of you listeners for your attentiveness and the question askers for the excellent questions. If additional questions come to mind, give me a call at (617)995-2500 and have a nice evening, take care.

Once again, that does conclude today's conference, so thank you all for joining us.