ImmunoGen Inc (IMGN) 2008 Q4 法說會逐字稿

Good day, and welcome, everyone, to this ImmunoGen fourth quarter fiscal year 2008 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 of Investor Relations and Corporate Communications, Carol Hausner. Please go ahead, ma'am.

Lovely. Thank you. At 4:00 p.m. this afternoon, we issued a press release that summarizes our financial results for our fourth quarter and our fiscal year ending June 30, 2008. I hope you've all had a chance to review it. If not, it is available 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 risk and uncertainties associated with an investment in ImmunoGen are included in our SEC filings which also can be accessed through our website.

With me today are Mitch Sayare, Our Chairman and Chief Executive Officer, Dan Junius, our President, Chief Operating Officer, and also currently our acting Chief Financial Officer and John Lambert, Executive Vice President and our Chief Scientific Officer. Mitch, Dan and John will provide an update on ImmunoGen, and Dan will also discuss our financial results. We'll then open the call to questions. I'll now turn the call over to Mitch.

Thanks, Carol. We've recently had a number of noteworthy corporate developments, both in our organization and in our product pipeline.

Last week, I had the pleasure of promoting Dan to the position of President and Chief Operating Officer. Dan has made a tremendous contribution to ImmunoGen since he joined us in mid 2005, and has been taking on increasing responsibility since that time. With his promotion, all of our operating functions, research, clinical, regulatory, manufacturing and business development now report to Dan who of course reports to me. Dan will also continue to function as our Chief Financial Officer until we fill that position and then that person, too, will report to me.

Additionally, last week, we also promoted our Chief Science Officer, John Lambert from senior Vice President to Executive Vice President, reflecting the huge contribution John makes as head of our research. I think the timing of this promotion is particularly appropriate as John's expertise is highly complimentary to Dan's and they work well together. You'll hear more from both of them shortly.

Let me begin with an update on recent progress with our clinical stage products. In the past two months, Genentech has provided a number of updates around trastuzumab-DM1 or T-DM1 as it's called. As you know, trastuzumab is the naked antibody marketed as Herceptin.

In June, Genentech reported impressive T-DM1 phase I findings at ASCO. Their phase I evaluation of T-DM1 was conducted in patients with HER2-positive metastatic breast cancer that importantly had progressed on treatment with Herceptin plus chemotherapy. The findings reported at ASCO were truly dramatic. First, almost all 12 of 15 of the patients treated with T-DM1 at its maximum tolerated dose every three weeks had meaningful clinical benefit, even though their breast cancer had earlier progressed on the antibody component of T-DM1.

Second, the median progression for survival in the patients was a remarkable 9.8 months. In their investor event at ASCO, Genentech noted that this compares to six months for the combination of Herceptin plus [pertusamed]. Third, the excellent tolerability of T-DM1 was maintained when it was dosed weekly in amounts as high as 7.2 mgs per kg over a three week period. The impressive antitumor activity seen when T-DM1 was administered every three weeks also was seen when it was given weekly.

These findings are all great news, but what we all really wanted to hear were Genentech's plans for the next steps with the compound. Happily, they described these during their quarterly conference call last month. In that call, Genentech stated that patient enrollment was complete in the phase II trial, they started last summer and what they now call the second line plus setting. And that they expect to report interim findings from this study at the ASCO Breast Cancer Symposium being held early next month.

They also discussed their plans to evaluate T-DM1 for HER2-positive metastatic breast cancer as third-line treatment, as first-line treatment, and potentially also as second-line treatment. What Genentech said was they plan to initiate soon a phase II trial to evaluate T-DM1 as a third-line treatment for HER2-positive metastatic breast cancer. Basically, it is designed to evaluate T-DM1 in patients whose cancer has progressed on Herceptin plus chemotherapy and on [tanker plus zaloda].

Genentech noted this trial is scheduled to start in the second half of 2008, and has objective response rate as the end point. Genentech shared that if this study yields compelling results, they plan to use it to discuss an earlier approval path with the FDA. That is, this trial can serve as a registration trial if the results merit it.

In addition, Genentech disclosed their plans to evaluate T-DM1 as a first line treatment for HER2-positive metastatic breast cancer. They plan to start a phase II trial in this patient population in the second half of 2008 as well. In it, patients with HER2-positive metastatic breast cancer who have not previously been treated for metastatic disease will be randomized to treatment either with Herceptin plus [Taxotere] or with T-DM1 as monotherapy.

Comparing T-DM1 with Herceptin plus Taxotere can be seen as a bold move by Genentech. But consider this. The end point of this trial is progression-free survival. Recall that in phase I testing, T-DM1 had a progression-free survival of 9.8 months and this was in patients who had received a median of four prior chemotherapy agents for metastatic disease.

We obviously don't know what the median progression free survival will be with T-DM1 in patients who have not received any prior treatments for metastatic disease, but I think it is reasonable to expect it to be greater than it is in patients who have failed four prior therapies. We also don't know what it will be for the Herceptin plus Taxotere steady arm, but know that Herceptin given with [Paclitaxel] achieved a median time to tumor progression of 6.7 months when used first-line in the large phase III trial that was a basis of Herceptin's approval for this use. Paclitaxel alone showed a 2.5 month progression free survival. So, bold, yes. But it makes a lot of sense what Genentech is doing.

Finally, Genentech noted they plan to make a phase III decision in 2008, related to T-DM1 as second-line therapy for HER2-positive metastatic breast cancer. I've already mentioned that Genentech completed enrollment in their phase II trial in the second-line plus setting. They said they expect to be able to make a decision regarding the phase III study, once they've had a chance to review the findings from this study.

Certainly, T-DM1 is a great validation of our technology since so many patients have responded after failing treatment wit the naked Herceptin antibody. Another point that really jumped out at ASCO is the tolerability afforded by our TAP technology. If we look at the maximum tolerated dose of TAP compounds dosed every three weeks, we have 3.6 mgs per kg for T-DM1, and about the same or even a little bit higher for IMGN242 and over 6 mgs per kg for IMGN901. These are three TAP compounds with three different link or payload combinations. Thus we're pleased with how our technology is performing both in efficacy and tolerability.

One last thing about Genentech. Given their relationship with Genentech, it is nice to be able to note that Roche has been visible in their support for T-DM1 by opting in on it last December, by discussing it in glowing terms in the 2007 annual report and then recent interviews by Roche management.

Let me now turn to IMGN242. As you know, our phase II gastric cancer trial was designed to evaluate IMGN242 in 23 patients. If an objective response by resist criteria is achieved in one of these 23 patients, we'll announce it since it triggers the expansion of the study to 40 patients.

If we hadn't had an objective response after we've enrolled all 23 patients, we'll announce that, too. Since that results in the discontinuation of our development of IMGN242. Our goal was to complete enrollment of these 23 patients before the end of our fiscal year on June 30, 2009.

We reported initial findings from the study at the ASCO annual meeting in June. Among the data reported was that marked biological activity had been seen in one of the first patients enrolled in the study; a patient with gastroesophageal junction cancer. Since 2004, when her cancer was first diagnosed, this patient had been treated with multiple chemotherapy regimens, including Docetaxel, 5FU and [carbelplaton], and also with radiation therapy.

Her cancer spread and she entered our trial with numerous metastasis, including one in her liver and in her lungs, so she was in a bad way. She was given her first dose of IMGN242 and had a marked biological response on her PET scans. She received a second dose and had measurable tumor shrinkage and unconfirmed partial response.

However, this response was not sustained long enough to meet the criteria for expansion of our study. A response needs to persist for at least four weeks to meet resist criteria and in our study, it would need to persist for at least six weeks because of the timing of the patient's scans. We'll keep you posted on further results as they come in.

In terms of IMGN901, we didn't report any IMGN901 data at the ASCO annual meeting, but expect to report new findings at both EORTC meeting in October and at the ASH meeting in December. This compound is currently being evaluated for the treatment of both multiple myeloma and of CD56 expressing tumors. We believe that the fastest route to market for IMGN901 is as a treatment for multiple myeloma. We're greatly encouraged by the activity we're seeing with the agent as monotherapy in our 003 study.

As I noted earlier, our compounds tend to be very well-tolerated, so we still haven't established the maximum tolerated dose or MTD for IMGN901 in this trial even though we've dose escalated through a number of cohorts. Once we establish the MTD in the 003 study, we plan to treat additional patients at that dose to gain a better understanding of its activity when used as monotherapy in highly treatment resistant patients.

Also after the MTD is established, we plan to start a phase I/II trial to evaluate IMGN901 used in combination with an approved agent for multiple myeloma such as [reblimen]. In recent years, there has been a marked shift in how this is treated. We now believe we can development IMGN901 the fastest if it is used in combination with an approved agent, since this will help to expedite patient enrollment. There's lots of interest among hematologists in having an effective antibody therapy for multiple myeloma, like they have with Rituxan or non Hodgkins lymphoma.

We expect to begin this combination trial within the next six to 12 months. It will include a short dose escalation phase I stage with three escalations maximum and then move on to a phase II stage. We'll keep you posted on this.

Since our last conference call, we also advanced a third compound into the clinic, IMGN388. Actually, since our last call, we submitted its IND, gained FDA authorization to begin clinical testing, did site initiation and dosed the first patient, not bad for a compound we inlicensed just a few months ago. We're excited about IMGN388 as it is the first TAP compound that can both destroy tumors directly by targeting and killing the cancer cells, and also indirectly by preventing the formation of the new blood vessels that solid tumors need to grow.

In our phase I study, enrollment initially is open to patients with any type of solid tumor. As any of these patients could potentially benefit from IMGN388, because of its potential effects on the formation of new blood vessels. Once the maximum tolerated dose is established, only patients with the types of tumors that express the integrin target will be eligible for enrollment.

But still, a pretty broad pool since these include sarcomas, melanomas and many different types of carcinomas. These will provide us with greater information on the activity of IMGN388 against tumors where both modes of action can come into play. Its direct effects on the tumor as well as as on the formation of neovasculature. I'll now turn the call over to Dan to discuss compounds and developments by other of our collaborators. Dan?

Thanks, Mitch. Mitch has already taken you through quite a bit about T-DM1. Let me now discuss the progress of some of our other partners before covering the financial results.

Last year, we predicted we would have three more TAP compounds in the clinic by this summer. You heard Mitch cover IMGN388. BIIB015, which is Biogen Idec's TAP compound with their antibody linked to our DM4 went into clinical testing this summer. The target there is cryptoproprietary target of Biogen Idec for the treatment of solid tumors. We earned a $1.5 million milestone payment with the IND filing earlier this calendar year.

The other TAP compound is BT062 from Biotest AG which remains on track to begin patient dosing this summer for the treatment of multiple myeloma. Recall that under this arrangement, this license, we have opting rights. That will bring to five the number of different companies generating clinical data on TAP compounds. Genentech, Sanofi-Aventis, Biogen Idec, Biotest, ImmunoGen.

Let me turn to Sanofi Aventis who has three compounds in clinical testing through our collaboration, AVE9633, AVE1642 and SAR3419. SAR3419 is a TAP compound that targets CD19 which is found in non Hodgkins lymphoma as well as other B cell malignases. This went into the clinic last fall. We expect the first findings at the ASH annual meeting in December.

AVE963 remains in phase I testing with nothing new to report. That leaves AVE1642, a naked on antibody that binds to and blocks the IGF1receptor. It's designed to block the pathway used by cancer cells to survive chemotherapy and is intended to be used with such agents. And the first findings were reported in combination with a chemotherapy agent at the ASCO meeting in June.

This is being used with Docetaxel which is marketed by Sanofi as Taxotere in patients with advanced solid tumors. The data that was reported showed that it is well-tolerated both alone and in combination with Taxotere. They also reported a substantial and sustained biological effect at doses above 3 mgs per kg. I saw encouraging evidence of anticancer activity, noting a breast cancer patient who entered the study with skin metastasis who had been treated with [taxainz], but experienced a significant clinical improvement in these skin metastasis when given Docetaxel in combination with AV1642. In ASCO, the presenter also noted that Sanofi Aventis plans to assess AVE1642 for a number of different types of cancers in combination with various different chemotherapy agents.

Let me spend a minute on the status of the Sanofi Aventis collaboration, because we called it the research portion of this collaboration comes to the close at the end of this month. It was established in July of 2003, originally as a three-year collaboration. There were two options to extend for additional one-year periods, both of which have been exercised by Sanofi. And there are no further extensions allowed under the agreement. What ends then on 8/31/08 is the research portion of this collaboration; the part where committed research support funding.

A number of elements, however, continue including their obligation to pay us milestone payments on the compounds developed under this agreement and recall those range from $21.5 million to $30 million per target. What also continues is their obligation to pass royalties on the commercial sales of any compound developed under this agreement. The compounds here include the three discussed earlier as well as two others that have been disclosed. A TAP compound for the treatment of solid tumors and a naked antibody for liquid tumors. Both of which are in preclinical stages. There are others at earlier stages of development.

Also continuing is Sanofi's obligation to fund research we conduct on their behalf and we expect there will be some ongoing research even though it is not under the collaboration agreement that ends this month. They also were obliged to pay us for materials we manufacture on their behalf. Also continuing are their rights to license our humanization technology for antibodies to targets outside of the collaboration.

There's one other element that ends at the end of August and that is Sanofi's option to secure a revolving door arrangement with us for expanded access to our TAP technology. Their exercise of the option provides them with the right to test our TAP technology with antibodies to targets not included in our collaboration and to take licenses for those targets on already established terms. While Sanofi's obligation to pay us committed research funding -- support funding for another year ends, the impact on this projected burn rate is mitigated by other factors which I'll discuss as I now turn to the financials.

Let me go through the fourth quarter of the year just ended, and the full fiscal year then I can talk about our expectations for FY '09. Our revenues in the fourth quarter were $4.5 million, down from $8.5 million in the same quarter last year. This compromised $3.4 million dollar in research and development support fees versus $6.8 million last year. Recall that our R&D support fees primarily represent funding pursuant to the Sanofi arrangement that we just discussed and to a lesser extent, funding earned under our development and license agreements with other of our collaborative partners.

As I noted, the fifth and final year with Sanofi began in September of '07 and is coming to a close. And per our expectation, the research and development support fees in that final year were going to be less, as ongoing development activity is transitioned to Sanofi.

Our license and milestone fees in the quarter were $1.1 million, down slightly from the $1.3 million in the year-ago period. Clinical material reimbursement in the quarter was $49,000, down from $0.5 million in the fourth quarter of 2007. This reflects revenue earned on materials made on behalf of our collaborators and also on any of our cytotoxic agents supplied to those collaborators. The activity varies based on collaborator requirements for clinical trials as well as on the timing that matches our release and expected by our partners.

In the quarter, our operating expenses were $16.5 million; that's up from $13.8 million in the same period a year ago. Our research and development expenses were $12.7 million, that's up from $11 million last year. These R&D expenses now include the cost of clinical materials reimbursed which previously were broken out separately. The increase in our fiscal 2008 R&D expenses is primarily due to increased antibody supply cost and also to development cost incurred with contract manufacturing organizations related to the potential production of later stage materials.

Clinical trial costs also increased by $0.9 million during the period ended June 30, compared to the same period last year due to costs associated with the start of IMGN388 clinical testing. Which included a $500,000 milestone expense we incurred to a third party related to the advancement of IMGN388 to clinical stage.

General and administrative expenses were $3.7 million, up from $2.8 million in a year ago period, primarily as a result of increases in patent costs and personnel costs, as well as expenses related to our move to Waltham. This produced a loss from operations of $12 million, compared to $5.3 million in the year-ago period. We had other income of $100,000 versus $800,000 the prior year. This is primarily interest income, losses realized on investments due to impairments, and gains recognized on forward contracts.

In fiscal '08, we had $300,000 in impairment charges on investment and no similar charges last year. That produced a net loss of $11.9 million or $0.27 a share compared to $4.5 million or $0.11 per share in the same period last year. For the full year, we had revenues of $40.2 million. That's up from $38.2 million last year.

Our research and development support fees were $15 million, down from $25.5 million last year. As noted, this decrease is primarily due to reduce Sanofi Aventis activity as discussed previously and as expected. Also, in the 2007 fiscal year, we earned more R&D support fees from our other collaborators compared with the current year.

License and milestone fees this year were $13.2 million, up $7.6 million last year. We had a number of items here in fiscal 2008, $5 million milestone earned with Genentech's initiation of phase II testing of T-DM1, a $1.5 million milestone earned with Biogen Idec's exhibition of the BIIB015 to the FDA, a $1 million milestone earned with Sanofi Aventis' advancement of SAR3419 into clinical testing. In the prior fiscal year, we have a $2 million milestone with Sanofi Aventis advancement of AVE1642 into clinical testing.

Our clinical material reimbursement revenue in fiscal 2008 was $12.1 million. This was up $7 million from the level of the prior year. The greater clinical material reimbursement revenue in our fiscal 2008 is primarily due to $5 million in revenue we recognized in providing one of our cytotoxic agents to a collaborator as well as to an increase in the amount of clinical material we supply to collaborators.

Operating expenses for the year were $74.4 million, up from $60.4 million in the year ago period. R&D costs were $60 million, that's up from $49.4 million last year. The increase is primarily due to the cost of supplying whatever cytotoxic agents as discussed previously. Also due to our purchase of DM1 and DM4 this year.

Our general and administrative expenses were $14.3 million, up from $11 million last year. In the fiscal year just ended, we recognized $1.5 million of noncash expense related to the rental of laboratory and office space in Waltham prior to our occupying this space in late March of this year. And also $800,000 of move-related expenses and these were classified as general and administrative expense. These expenses were also greater in the 2008 year than 2007, due to increases in costs associated with both personnel and with taxes. This led to a loss from operations in fiscal 2008 of $34.1 million which is up from a loss from operations of $22.2 million in fiscal 2007.

Our other income net in fiscal 2008 was $2.1 million, down from $3.3 million a year ago. Again, this category is interest income, losses realized on investments due to impairments, and gains recognized on forward contracts. And in fiscal 2008, we had about $0.5 million in impairment charges on investments with no similar charges incurred during fiscal 2007. This produced a net loss of $32 million, or $0.75 a share in fiscal 2008, compared to a $19 million net loss or $0.45 a share in the year-ago period.

At $32 million, it's slightly above the high end of our guidance of $25 million to $31 million for the year. In part, due to a partner event we expected to happen in fiscal 2008 that did not occur. We now expect that to happen in early fiscal 2009, as well as the unplanned impairment charge into other smaller items.

In terms of our balance sheet, our cash and marketable securities ended the year of 2008 at $47.9 million versus $59.7 million as of the end of June a year ago. The June 2008 balance includes $25 million raised due to the sale of common equity to a single buyer in June of the current year. As has been the case, each time we've reported, there's no debt. There's no converts, no preferred and there's or warrants in either period. And the money just raised did not include any one of those.

Our cash used in operations in fiscal 2008 was $20.2 million which compares to $15.8 million in fiscal 2007. Capital expenditures last year were $18 million. That compares to $2 million in fiscal 2007.

I should note that fiscal 2008 capital expenditures include $3.7 million for improvements of the Company's capabilities at our manufacturing plant in Norwood, Mass, as well as $10.3 million to build out the laboratory and office space at the facility we now occupy in Waltham that we moved into in late March 2008. And $10.3 million of lease hold improvements are being paid by the landlord of the Waltham facility with such reimbursements recorded as a benefit to cash used in operations.

Our actual capital expenditures were lower than our fiscal 2008 guidance while our cash used in operations was higher by a corresponding amount. These variants are tied to our underspending the allowance established for the build out of our new space in Waltham. This underspending reduced our capital expenditures for the year, but also reduced the reimbursement funding we would have received from the landlord which would have benefited our cash from operations. Making those adjustments, we pretty much came in within the guidance that we had provided.

Turning now to our 2009 fiscal year, we expect our cash used in operations to be between $20 million and $23 million next year or I should say the current fiscal year. And our capital expenditures to be about $2 million, that is we expect our cash used in operations to be at a similar level to the level in fiscal 2008 and our capital expenditures to be substantially lower, returning to the historical spending level. Thus in our 2009 fiscal year, we expect to have a lower cash use overall than in 2008 even though we'll be putting more resources behind our own compounds.

The conclusion of the funded research portion of our collaboration with Sanofi Aventis at the end of this month is expected to reduce our total revenues and increase our net loss, bringing our expected net loss to between $37 million and $40 million. Or to the impact of the conclusion of this funding in our cash position is expected to be offset by lower operating expenses, the reduced capital spending I noted, and increases in other collaborator activity.

I noted that we had $47.9 million in cash and marketable securities as of June 30, 2008. We expect to end our 2009 fiscal year with more than $23 million in cash and marketable securities on our balance sheet. With that, let me turn the call back over to Mitch.

Thanks, Dan. As you can tell, we're very excited by our progress and by the progress made by our partners. The TAP technology we've developed has yielded compounds with very encouraging activity and excellent tolerability in initial clinical testing. We attribute this to our cell killing agents being highly potent and our linkers being smart, able to keep the cytotoxic payload firmly attached to the antibody until released in an active state inside the cancer cell.

Part of our mission here at ImmunoGen is to continually work on broadening the application of our TAP compounds. To this end, a few months ago, we unveiled another of our technology innovations. The new family of polar linkers that extend the utility of TAP compounds to the treatment of multidrug resistant cancers. We're finding very strong interest in these new linkers among our current collaborators as well as among potential new partners. John will brief you now on these linkers.

Thank you, Mitch. One of the programs we've had in research is to gain a comprehensive understanding of how TAP compounds are processed once they enter cancer cells. This program has provided us with certain unique expertise that our partners have come to rely on to understand the intercell processing of their TAP compounds. It is also provided us with a considerable amount of highly useful information.

One outcome of this research is our new family of polar linkers which we developed to greatly enhance the activity of TAP compounds against cancers with primary multidrug resistance such as colon cancer. We expect this innovation to extend the reach of our technology to these types of cancers, and potentially also to ones with relatively low expressions of the target antigen on the cell surface. Our new polar linkers can be used with our current cell killing agents, DM1 and DM4, and also with both of our cleavable and noncleavable linker technologies.

We're starting to use these linkers in the new TAP compounds we're developing in research. And as Mitch mentioned, they've also generated a lot of interest among our current and potential partners, as no one else in the field has anything like them. Mitch?

Thanks, John. Let me close with a summary of the milestones we expect to achieve in our 2009 fiscal year ending next June.

For T-DM1, we expect interim phase II results to be reported at the ASCO Breast Cancer Symposium early next month. We expect Genentech to begin two phase II studies with the compound. One evaluating it as a first-line treatment and one evaluating it as a third-line treatment for HER2-positive metastatic breast cancer in the second half of 2008. We also expect Genentech to make their phase III decision about also evaluating T-DM1 as a second-line treatment for this cancer in 2008. We expect additional Genentech activity in 2009, including the presentation of more clinical findings with T-DM1.

For IMGN901, we expect to report additional findings with the compound in the treatment of solid tumors and multiple myeloma during the fourth quarter of 2008. We expect to establish the maximum tolerated dose of IMGN901 as monotherapy for the treatment of multiple myeloma. Once we have that, we expect to initiate a phase I/II study to assess the safety and activity of IMGN901 for multiple myeloma as part of a combination regimen. For IMGN242, we intend to complete enrollment of the 23 patients needed to determine if we should expand or end our phase II gastric cancer study. And we expect to report additional clinical findings with this compound.

Additionally, we expect the first SAR3419 clinical data will be reported in late 2008. We expect to know whether Sanofi Aventis will exercise their option for expanded access to our TAP technology by the end of this month. And we expect to have additional partner-related announcements including at least one new technology license. I look forward to keeping you posted on all of this progress. Carol?

Thanks, Mitch. Operator, we're now ready to open the call to questions.

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

Congratulations on the year and thanks for taking my question. Really, just one question. Mitch, in talking about the new polar linker technology that you recently unveiled. You talk about how you intend to either apply that or use that commercially with existing and or new partners.

Was this something you had been working on anyway? Or was this in response to some requests from would-be partners? Maybe just talk about the evolution of how that came to pass and how you're going to use that going forward.

I think rather than me doing that, why don't we let John do it since he was directly involved with it, Brian.

Over the last year, we've been working on the polar linkers ourselves. Once we began to see the power of their potential, we have alerted some of our current partners to the possibilities of applying them to the molecules that we've had in development with them.

To answer your question directly, Brian. This was not stimulated by outside interest. We stimulated their interest once we disclosed what we were doing.

Great. Hypothetically, if Biogen Idec said hey, we filed a 9D, but if you believe you've got new linker technology that could perhaps provide enhanced efficacy, is that something where they would want or have the ability under the terms of the agreement -- I hate to use the term, replacement linker, but to get a new compound in to replace the one that they just found in IMB4?

Most of our partners have the right to any improvement that we make on the technology platform. We could expect there to be -- they would -- if they were to make the change, and I don't think there's any plans to make a change to any existing clinical products, then it would be part of our deal. They wouldn't have to do a new deal.

Great. And then going back to 901. In terms of picking which drug or which setting to go forward into -- obviously as you pointed out, it has been a rapidly evolving market environment in myeloma. Are you still relying on either some outside advisers or potential partnership discussions? I know there are multiple players that they could potentially make sense. What influence are they if at all having on the discussions?

The external advisers have had a lot of influence on this discussion. It is really they who are directing us toward the combination study, based on their assessment of what they're seeing right now in their clinical settings. We have had discussions with a variety of partners on this product, not just for multiple myeloma but other applications as well.

I don't know that any of those discussions would strictly determine which of the other agents that are currently in use would be the best. I think it is simply a matter of the data dictating that. And thus far, the data clearly point to Revlimid as the superior agent to be used in combination with this product.

Great. And then one last question, I believe I know the answer to this. If Roche is indeed successful in their attempts to acquire the remaining shares of Genentech that they already own, given that they're already opted in to the T-DM1 program, I would presume there's no functional change to the agreement governing that product.

That's correct.

All right. Thanks, Mitch.

Sure.

Our next question comes from Joel Sendek of Lazard Capital Markets.

Hi. Thanks. Couple of questions. First, just following on the Roche Genentech implication for you guys. Do you think that potentially can delay the go, no-go decision? From your experience with working with Genentech over the last couple of weeks, are things moving along as they have been in the past or have things getting delayed?

I don't think that -- I think that Roche asserted themselves, regarding this product in December when they opted in. I don't think that combining the companies will make any difference toward the timing of the product. No. I'm not at all concerned about that. We think this is going full steam ahead. Take my word for it.

I want to go back to what you said about influencing the go, no-go decision. It became pretty clear in the quarterly call that that go, no-go decision is-- as it applies to the second-line phase III study. The third-line phase II study that might be used as a registration study if the data warranted, has already been favorably decided.

What isn't decided is if the data will warrant submission under sub-part H. But that remains to be seen. I think that the go, no-go decision on the phase III study in second-line, I think what they said was that that would be largely determined by results that they're looking at from the completed phase II study that they'll report on beginning next month.

Right. Even if they say no-go, they still could go forward with the third line.

That's what we would expect. If they were to say no-go with the phase III, they have two other phase II studies ongoing, one of which is potentially pivotal. We don't see this as an issue at all.

Right. And then any idea when those studies, the first line and the third line phase IIs will start?

Yes. Carol just made sure that I said that these are planned studies. As far as we know, they haven't started either of them. But they said that they would start them during the second half. And that they're posted on clinical trials.gov, starting in the second half as well.

In the data at the ASCO meeting in September, do you know how many patients and whether they'll present the data in San Antonio in December as well?

No. We don't know whether -- well, I suspect they will present it in San Antonio, but they haven't said that formally. We do know that the study was structured to have 100 evaluable patients. We don't know how many patients they actually accrued. But the details that were given for the study were there would be -- accrue 100 evaluable patients.

Okay. Thanks. Just one final financial question. The cash used projected for '09 is $20 million to $23 million, but projected net loss is $37 million to $40 million. What's the delta there? What's the noncash expense?

Well, I think that principally is going to be the other partner activity they referenced, Joel. Some partner activity results in cash, but not revenue. Or the revenue gets deferred or reported over time. Mitch referenced, for example, one new partnership. We think it would be that and potentially other things that would take place during the year that would generate cash, but not be fully reflected in revenue.

Okay. Thanks a lot.

You're welcome.

Our next question comes from Shiv Kapoor of Morgan Joseph.

Hi. Thanks for taking my question. Most of my questions have been answered. Just one quick one on the financial. Approximately what portion of the R&D this quarter -- R&D support came from Sanofi Aventis?

Hang on. I've got that. It is a reasonable portion. It has been declining. We're down under -- I think it is under 40% in the quarter. Whereas it has been at levels much higher than that.

While he's looking, Shiv, do you have any other questions?

No. Let me ask you a question. If Genentech decides to run a pivotal study, T-DM1 but not a phase III study, a pivotal phase II study. Is that considered under your agreement as progressing and would you expect a milestone then?

We haven't disclosed when we received milestones, but I would consider that substantial progress. We don't -- we haven't indicated anything other than we so far received $7 million in milestone payments.

Okay. I'll have one more question. Do you think that Genentech could report top-line data from the ongoing phase II study before the ASCO breast cancer meeting next month?

A couple of things. That study is -- enrollment has been completed. That, they said. There's only four weeks between now and then. I don't know, but I suspect not. It is September 5 through 7 is when that meeting is.

Okay.

Getting back to your question, actually, the revenue from Sanofi in the quarter was just north of 50%. For the year, it was -- I think -- I don't have the specific percentage, but I would say in the 30% to 35% range.

30% -- 30% to 35% for the quarter?

For the full year. For the quarter, it was actually over half. Some of that is a little bit distorted, because you'll note that our clinical material reimbursement revenue was very low in the quarter. Normally, we would have -- that tends to be pretty lumpy.

On a normal quarter, we had over $12 million in revenue from clinical material reimbursement for the year. You would expect actually over $13 million. If you spread that out, you would have much more in a single quarter, but it tends to be pretty lumpy. For this quarter, it was under $100,000. That made Sanofi's participation out of the R&D support work that we do much higher, in terms of our overall revenue than it normally would.

Fair enough. Going forward, R&D support levels should reflect around half of what you did this quarter?

Again, you've got different programs that may be ramping up that we're doing for other parties. Some are ramping down. It wasn't a particularly active period. For example, we were still recovering in the early part of the quarter from our move into the new space here in Waltham. That probably hurt us a little bit in terms of absolute revenue in the quarter.

I don't think taking that and cutting it in half is a reasonable run rate. I also think that we'll have ongoing work for Sanofi although not at the level that we will have shown for this last contract year. But they still will be -- I would expect on an annual basis, a seven figure player with us in terms of R&D support.

Okay. Thanks and best of luck with the meeting next month.

Thank you.

We have time for one more question. That will come from Jason Kantor of RBC Capital Markets.

Hey, it is Mike with Jason Kantor. Couple of quick questions for you guys. In regards to IMGN242, can you give us some update on enrollment or accelerated -- actually the speed of enrollment is it accelerating? And then can you repeat what you said about timing of the scan versus what is required to be confirmed for PR?

The first part of your question is enrollment and we still have a ways to go yet before we got to 23. What we promised was that if we see a response within the -- if we get a response, we'll report that immediately. But if we don't, we have to accrue all 23 before we know that we haven't gotten any responses. And so that may take some time yet. What I indicated is sometime in the next six to 12 months, we should be complete. What was your -- there was a second half of the question.

In terms of scans, how often are they scanned versus what is required to be a confirmation?

Resist is four weeks -- that you have a four-week response. That is there's no growth, no progression of any lesion during the four-week period. But our scans, because we do -- once every three week cycles, our scans are after two cycles, so it is six weeks.

Yes.

It is a little tougher standard, but we think it is do-able. That's why we're doing it.

Secondly, on 388, can you remind us what the opting rights are for [senecore] and what rights they would have to either opt in or take the program back if at all? Is there a certain event that needs to happen for them to make their decision? Is there a window, et cetera?

There is. There is a -- once we complete early clinical trials, they have an opt-in right. If they exercise it, then they get to split. They pay us back for our expenses thus far. And we split costs going forward for North America, and they get the rest of the world and pay us a nice royalty.

Okay. Do they pay all the expenses or do they pay back half of the expenses?

They pay back all of our expenses. But going forward, we pay half and they pay half. And we get half of the return, and the get half the return for North America.

Lastly, can you remind us what the official guidance or commentary is on the royalty for T-DM1? Is it the same for Roche sales and DNA sales?

It is the same for Roche sales and DNA. sales. We've always said it is in the mid single-digits.

All right. Thank you, guys.

Sure. Thanks, everybody.

That ends our call. Thank you for your interest and invite you again, if you have any additional questions to give me a call. We're now in Waltham, so my number is now at 781-895-0600. Take care and have a good evening.

Again, ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may disconnect at this time.