ImmunoGen Inc (IMGN) 2008 Q1 法說會逐字稿

And welcome to the ImmunoGen First Quarter Fiscal Year 2008 Conference Call. Today's conference is being recorded. Now at this time, I would like to turn the conference over to the Executive Director of Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

: Good afternoon, everyone, and thank you for joining us on our quarterly call. At 4:00 this afternoon, we issued a press release that summarizes our financial results for the first quarter of our 2008 fiscal year, the quarter ending September 30, 2007. I hope you've all had a chance to read it. If not, it's available on our website at immunogen.com.

During today's call, we'll 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 web site. With me today are Mitch Sayare, our Chairman and CEO; Dan Junius, our Executive VP of Finance and CFO.

Mitch will provide an update on ImmunoGen and Dan will discuss our financial results. We'll then open the call to questions. I'll now turn the call over to Mitch.

Thanks, Carol. We're delighted that there are now five products in the clinic that make use of our proprietary TAP technology, two wholly owned by us and three through our partnerships with Genentech and Sanofi-Aventis. Additionally, a sixth product that we developed, a naked antibody, also is in human testing by Sanofi-Aventis.

We expect clinical findings to be reported with most if not all of these products over the coming year. And indeed, last week, we reported updated Phase I findings with our huC242-DM4 compound. Dose escalation in that study has been completed so that now only patients with two-plus or three-plus homogeneous CanAg expression are eligible for enrollment.

While this Phase I study has provided important information on the safety of huC242-DM4, it isn't designed to assess activity. To do that, this past summer, we initiated a Phase II study in gastric cancer with this compound. We chose gastric cancer because it has few treatment options and was found to be sensitive to huC242-DM4 in our preclinical studies, thus as a true test of the compound's activity as a single agent. I'm pleased to report that patient enrollment is going well in this study and that we expect to report initial findings from it in 2008, most likely at the ASCO meeting in June.

We're also making good progress with the Phase I trial, Study 003, that evaluations our huN901-DM1 compound in patients with multiple myeloma. We have completed several dose escalations since we last reported data from this study and we'll be reporting updated findings at the ASH meeting next month.

The findings in Study 003 will inform our future development plans for huN901-DM1 and we expect to be able to share them with you in the next few months. We have also submitted all of the paperwork needed to reopen the two studies that evaluation huN901-DM1 in CD56 expressing solid tumors. Our studies 001 and 002 can expect new patient enrollment to start later this month.

Turning to the four compounds in clinical testing through our partnerships, Genentech is making great progress with T-DM1. They began Phase II testing of T-DM1 in July in patients with HER2 over-expressing metastatic breast cancer that's progressed during prior treatment with HER2 directed therapy. Genentech already has over 30 sites enrolling patients in this study and plans to include 100 patients. So they're off and running with this compound.

They're also continuing to report new Phase I data on T-DM1. As you know, at the ASCO meeting in June, they reported that three out of nine patients treated with T-DM1 at the maximum tolerated dose had an objective response, even though all of these patients had cancer that progressed on treatment with Herceptin plus chemotherapy. By the time of the ECCO meeting in September, 15 patients had received T-DM1 at its MTD and five of these patients have had an objective response. Phase I findings are also scheduled for presentation at this year's San Antonio Breast Cancer conference to be held about six weeks from now.

We're pleased that our partner Sanofi-Aventis has advanced SAR3419 into clinical testing. This TAP compound targets CD19, an antigen found on B-cell malignancies, including non-Hodgkin's lymphoma. SAR3419 was originally developed by ImmunoGen. We licensed it to Sanofi-Aventis as part of the broader collaboration between our companies. They presented quite a bit of preclinical information on this exciting compound last year and will report more at the ASH meeting next month.

This brings to three the number of compounds now in clinical through our collaboration with Sanofi-Aventis. They're also conducting multiple trials with their other two clinical stage compounds, AVE9633 and AVE1642, and will be reporting clinical data for both compounds at the ASH meeting next month.

As you recall, AVE9633 is a TAP compound in development for the treatment of acute myeloid leukemia. At ASH, they'll report clinical findings from an ongoing Phase I study that evaluates the compound when given once weekly for two weeks in a four-week cycle. Sanofi-Aventis is conducting a Phase I trial evaluating AVE9633 given three times a week every four weeks as well.

AVE1642 is a naked antibody that binds to and blocks the IGF-1 receptor and thus prevents cancer cells from using a pathway that helps them survive exposure to chemotherapy. The findings at ASH will be from a Phase I study evaluating the compound given as a monotherapy to patients with multiple myeloma. As would be expected based on how AVE1642 works, we think the most interesting findings will come from studies where it's used in combination with chemotherapeutic agents.

All in all, lots going on, as you've heard. And Dan will now discuss the financial results. Dan?

Thank you, Mitch. Let me take you through the components of our income statement, then talk about our cash consumption and our outlook for the balance of the year.

In terms the quarter, we recorded revenue of $11.4 million, which is up from the $7.8 million last year. In terms of the individual components, our research and development support fees of $4.5 million were down $1 million from last year. Recall that this is primarily funding earned under our research collaboration with Sanofi and to lesser extent from our other partners.

The Sanofi commitment for this fifth year, which began in September, is $10.4 million. That compares with $18.6 million, which was earned under this collaboration agreement in the year that ended August of 2007. Our license and milestone fees in the quarter were $4.2 million. That's up from $1.4 million last year.

The first quarter of fiscal 2008 includes $3 million related to initiation of the Phase II testing of T-DM1 by Genentech. You'll note in our earlier release that we indicated we received $5 million in cash with this event. The remaining $2 million will be recognized as revenue once the contingent event is achieved that we expect to occur in the current quarter. That's the second quarter of fiscal 2008.

Our clinical material reimbursement for the quarter was $2.8 million compared to $900,000 last year. This comes from clinical materials that we've -- we produce on behalf of our collaborators. And we earn the clinical material reimbursement revenue with the supply of these materials to our collaborators. The higher revenue in Q1 of '08 compared to last year is primarily due to timing of batch acceptance by our collaborators, but also to shipment of substantial quantities of one of our cytotoxic agents to a partner.

Our operating expenses for the first quarter were $13.3 million, down $1.6 million from the $14.9 million level last year. Our research and development expenses of $9.1 million were down from $11.4 million in the first quarter of last year. And this is primarily due to a decrease in antibody cost incurred in the quarter just ended. It's also due to a decrease in development costs related to the production of later-stage materials incurred at the CMO and to increased overhead absorption related to clinical material manufacturing.

Be it advised that we do expect greater antibody and DM1/DM4 costs over the balance of this fiscal year.

Our cost of clinical material reimbursement was up at $1.7 million compared to $700,000 last year. A significant portion of the DM1 and DM4 sold in the first quarter was previously categorized as excess inventory on our -- under our inventory policy and written down to zero value. This actually benefited the first quarter of fiscal '08 by about $1 million.

Our G&A of $2.4 million was down from $2.8 million last year and this is primarily due to a decrease in patent expense associated with prosecuting our patents.

This led to a loss from operations of $1.8 million. That's down significantly from the $7.1 million last year. When you factor in other income of $800,000 in each year, principally interest income, we ended with a net loss of $1 million in the first quarter of 2008 or $0.02 per share compared to a loss of $6.3 million or $0.15 per share in the prior year.

Looking at cash in the quarter, we used $5.8 million in operations in the first quarter of fiscal '08 compared to $4.6 million last year. The big items in the current -- in the quarter just ended were $3 million in payments to a provider that we had expected to pay at the end of our prior fiscal year, as well as $3.8 million that was needed to secure the lease on our new facility in Waltham. This left us with cash and marketable securities in the quarter of $53.6 million. That compares with just under $60 million as of June 30, the end of our last fiscal year.

As a reminder, that -- our balance sheet is entirely common equity. There's no debt, no converts, no preferred, no warrants outstanding.

One other item of note relative to cash flow, our capital expenditures in the quarter just ended were a $.5 million, the same as the level of last year.

Now in terms of guidance, despite the very good performance in the first quarter, our guidance for the balance of the year actually remains unchanged. As we noted when we reported at the end of our fiscal 2007 year, we told you to expect a net loss from fiscal 2008 of $30 million to $33 million, cash used in operations of the same level, $30 million to $33 million, and capital expenditures of $8 million to $9 million.

And again, the significant increase both from last year and from the run rate of the first quarter is tied to a reduction in Sanofi-Aventis research payments that I noted we're experiencing already in the first quarter of this year. We expect higher antibody and DMx cost as we go throughout the current year, the cost of prosecuting our -- or advancing our clinical trials for the various compounds that are proprietary to ImmunoGen and in the clinic, and then some transition costs associated with our relocating to the new facility in Waltham.

In a somewhat similar vein, our higher capital expenditures are partly to take care of some furnishings for the new facility, as well as to expand our manufacturing capability and our staffing capacity down in our Norwood operation.

So again, the -- despite the strong first quarter, which we're very pleased about, at this point, we're not changing our guidance for the full year.

So with that, let me turn it back to Mitch.

Thanks, Dan. Well, as you can tell, we're really excited about the progress we've made and that is being made by our partners. So what to expect over the next month, few months? First, we'll report huN901-DM1 clinical data at the ASH meeting in early December. Our partner, Sanofi-Aventis, will also report data from AVE9633 and AVE1642, the results of clinical trials at the ASH meeting. And they'll also report on preclinical findings from SAR3419.

Our partner Genentech will report clinical data with T-DM1 or Herceptin DM1 at the San Antonio Breast Cancer conference in mid December. Clinical findings will be reported in 2008 for most if not all of the six compounds that are now in the clinic. And we expect another one to three TAP compounds will advance into clinical testing before the end of our fiscal year next June.

So I look forward to keeping you posted on our progress. Carol?

: Great. Thanks, Mitch. Operator, we are now ready to open the lines for questions.

Very good. (OPERATOR INSTRUCTIONS). Our first question will come from Joel Sendek with Lazard Capital Markets.

Thanks. A couple of questions. Let me start with T-DM1. Given the fact that Genentech has 30 sites up and enrollment seems to be going well, is it safe to say we might see some data on that drug at ASCO next year.

Well, they haven't --this is Mitch, Joel. They haven't actually told us that they will give data at ASCO. But it wouldn't surprise me at all. I mean, their attitude has been one of getting data out there as rapidly as possible, in part to generate excitement and interest in the product. And nothing they've indicated to us has changed in that regard. So yes, I would expect to see data at ASCO.

Okay. And then nearer term at the San Antonio meeting, do you know whether they'll have more than the 15 patients that was at ECCO? Any idea about that?

I don't know. We -- they have indicated that they're going to be talking about Phase I studies. We know that they have two Phase I studies, the one that had the 15 patients at 3.0 mgs per kg. And we know that they're also dosing patients once a week as opposed to once every three week, from which those data were derived. So I would suspect that data from those two clinical studies will be reported. As to whether it'll be more than 15 at 3.6, I just don't know.

Okay. And then quickly on Sanofi, on 9633, have you seen that data yet? Or are you familiar with what's going to be presented at ASH?

We have seen some of those data. And we think that -- and we expect those data to be reported at ASH. And we look forward to seeing the data at ASH.

Okay, fair enough. Thanks a lot.

And our next question is from Shiv Kapoor with Ferris, Baker Watts.

Thanks, I've got a couple. We'll start with collaboration. We keep hearing from various sources that there's increasing enthusiasm among Genentech scientists and management about your technology platform, especially since the T-DM1 Phase I results. Can you tell us since those results came out, has there been increased interest from other companies apart from Genentech, biotech or pharma?

Shiv, this is Mitch again. Yes. I mean, I would say that there has been a fair -- a fairly significant increase in the level of activity. You know, I -- as I've explained before, at any one time, we have several antibodies in-house that we've obtained from third parties for us to conjugate with our DM1 or DM4 and give back to them for testing. And, in fact, that's what creates our deal flow. And we were aware that there were several companies who wanted to wait to see what some of those data from Genentech and other data looked like before taking that step. And I think that from the things that we've heard and seen, those companies are more than satisfied by the data that they've seen from Genentech and from us.

Second question on collaboration, in your more recent collaboration with Biotest, you were able to extract it seems like better economics for yourself when you compare it to the earlier deals. Do you think you're better positioned now after those data and after maturing of your technology in your negotiation with partners?

Yes, we do, Shiv. We see improving - the likelihood of improving economics to be real going forward with new deals as they come down the pike indeed.

A couple of questions, just trying to remind myself, one on 901, could you remind us what the results were from last ASH and what doses were studied and what doses are we going to see at this ASH?

So this was the 003 study in which last ASH we reported on 40 and 60 mgs per meter squared. Those were the two doses that were completed at that time. And out of -- at 60 mgs, we had one patient with an objective response, substantial reductions in serum M component and disappearance of urine protein entirely.

We have since dose escalated higher -- 75, 90, and 112 mgs per meter squared. Without giving too much detail, we'll report on the higher dosage levels. MTD is still not yet established for that product, but we'll report the data that we have at-hand at ASH. So I don't want to, you know, jump the gun here by talking about activity until that abstract or that poster is published.

Thanks. And --

Sure.

-- second reminder -- and this is my last question. On Sanofi-Aventis, can you remind us if your royalty structure is the same for your partner drugs, which is low double -- low single-digits royalties, or is it higher?

Well, I never said we had low single-digit royalties for anything. So -- but, I mean, our -- we always have higher than low single-digit royalties. For some of the Sanofi-Aventis products, especially considering the ones that we licensed to them from our own preclinical pipeline in 2003 when we first entered into the collaboration, the royalties do extend up into the double digits, that's correct. So they are higher than royalties that we typically get from our relationships with other companies such as Genentech or Biogen Idec or Centocor and so forth.

Thanks, Mitch.

Sure, Shiv. Anytime.

(OPERATOR INSTRUCTIONS). We'll next go to Brian Rye with Janney Montgomery.

Well, good afternoon. And thanks for taking my question. Most of them have been answered, but did just want to ask one question, Mitch, on C242-DM4. You mentioned that in the -- I guess the ongoing Phase I study, enrollment's now limited to patients that, you know, strongly I guess express the CanAg antigen. I'm wondering if that also applies to the Phase II gastric cancer study.

The gastric cancer study is -- as you know, not all gastric cancer patients express the target epitope. But when they do express it, they express it pretty strongly. So there is no specific criterion in the gastric cancer study for level of expression. It's a qualitative rather than a quantitative measure.

Okay. But --.

-- and let me remind you that two-plus/three-plus is pretty much semi-quantitative I this is what they refer to that as.

Okay, fair enough.

Okay.

And then I think that that's pretty much it, although just one last housekeeping question for Dan. You mentioned that, you know, I guess in looking at the R&D that should pick back up. Should it return to sort of levels that we saw at the end of fiscal '07? Or more or less?

Well, I think for the full year, Bryan, it's probably going to be a little bit more because I think as I said, we benefited in R&D from very low spending of an item that's going to be pretty significant to us for the year. And that's material -- work for materials, both acquisition of antibody for ongoing trials, as well as development work on antibody, plus acquisition of DMx. And those values in the current quarter were relatively low. Those will accelerate as we go into the back half of the year. So I think that what you'll see for the year actually is a somewhat higher value in that particular category.

Okay, thanks guys. Good quarter.

Yes, thanks Bryan.

(OPERATOR INSTRUCTIONS) I see no further questions. I'd like to turn the call back to Carol Hausner for closing comments.

: Excellent. And thank you guys for your interest. And as don't hesitate with any additional questions at (617)995-2500. Take care and good evening.