ImmunoGen Inc (IMGN) 2010 Q4 法說會逐字稿

Good day, and welcome, everyone, to this ImmunoGen fourth quarter fiscal year 2010 financial results 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, Ms. Carol Hausner. Please go ahead, ma'am.

Thank you. At four o'clock this afternoon, we issued a press release that summarizes our financial results for the quarter and our fiscal year ended June 30, 2010. I hope you've all had a chance to review it. If not, it's available on our website.

During today's call, we will make forward-looking statements. Our actual results may differ materially from the projections made. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which can also be accessed through our website.

In our call today, our Chief Executive Officer, Dan Junius, will provide an update on ImmunoGen, and our Chief Financial Officer, Greg Perry, will discuss our financial results and guidance. We will then open the call to questions. Dan?

Thanks, Carol, and good afternoon, everyone. Thank you for joining us.

There's certainly been a lot of progress since our last quarterly call in April. The headline item would have to be that a BLA was submitted for T-DM1 in July. This makes that the first TAP compound to go before the FDA, or, for that matter, in front of any regulatory authority, for potential marketing approval; so, certainly a big event in the life of ImmunoGen.

There was also a lot of clinical progress. We saw the first clinical data reported for our IMGN388 compound at ASCO in June. The first clinical data were reported for a TAP compound used in combination, that would be for the T-DM1 plus Pertuzamab compound or combination, also reported at ASCO. Patient enrollment got underway in July for the second T-DM1 phase-three Trial, that they've named MARIANNE, assessing it for first-line use, and meaningful new clinical data were obtained from an array of TAP compounds, enabling presentations to be scheduled or expected at each of the major upcoming conferences; that would be ESMO, EORTC, ASH, and SABCS.

At the same time, the number of clinical stage compounds that ImmunoGen is involved in continue to increase. That number was at six at the time of our last call. Clinical testing with SAR650984 started in June, and we expect patient dosing with SAR566658 to start shortly. That would bring the total to eight. We expect up to four more compounds to enter the clinic in 2011. Two to three would be through our partnerships, and one being a wholly-owned ImmunoGen compound. That wholly-owned ImmunoGen compound would begin the flow of what we expect to be a sustained stream of proprietary compounds entering the clinic from our R&D programs.

Finally, in the quarter we conducted a successful financing, raising $77.5 million from new and existing shareholders in a tough market environment. It's a day I am sure all of us will remember, May 6, when the market dropped 1,000 points. Nonetheless, we had a full book; we actually upsized the deal slightly, the [shoe] was exercised, and I think that it was at a very fair price, and it let us accomplish some very important elements. First, it gave us the funding to allow us to be aggressive in the advancement of our own compounds in our pipeline, and it also gave us the flexibility to be firm in our business development negotiations, which was a very important element that we were hoping to address through the financing.

Let me go through the product pipeline, and I will start with T-DM1. As I noted, a marketing application was submitted in early July by Roche. They've applied for accelerated approval; that would mean a decision should be forthcoming within six months, which would take us to early 2011, very early 2011. This is for patients with advanced HER2-positive breast cancer, previously treated with multiple HER2-targeted medicines and chemotherapies -- in other words, third-line and later use. It was submitted as a BLA; a BLA affords longer protection than NDA filings under the new Health Care Reform Bill, and some of those protections supplement what's afforded by a patent estate.

Roche continues to make solid progress in development of T-DM1 for second-line use. Over 185 clinical sites across 20 countries now are participating in the phase-three trial for this indication. Roche has noted that, if successful, this trial will be used to support regulatory filing of T-DM1 in 2012 for second-line use in the US and Europe. This, then, would make that the expected approval pathway for T-DM1 in Europe since the third-line study will not be eligible for filing in Europe.

Patient dosing started in the phase-three trial, MARIANNE, in early July. This assesses T-DM1 for first line use head-to-head with Herceptin used with a taxane. This is also intended to support regulatory filings in the US and Europe. Prior to starting this phase-three trial, Roche conducted a randomized phase-two trial, assessing T-DM1 for first line use, again, head-to-head with Herceptin used with a taxane, specifically Taxotere. The findings from this phase-two study will be reported at ESMO in October. Roche has noted that we'll see more data with the T-DM1 plus Pertuzamab trial at SABCS in December. Hopefully, this will include data from the patients who received this combination first-line, since these data weren't reported at ASCO. There's also the potential that something more will be said about their plans for [agivent] this year, although this something that we don't have any particular insight into, we would just hope that they provide some clarity there.

We are extremely pleased with the progress Genentech and Roche are making with T-DM1. As you know, we took the idea of T-DM1 to Genentech back in the late '90s, when they were just focused on getting Herceptin approved. We've worked with them extensively to assess alternative designs, including the one with our SMCC non cleavable linker, that they ultimately took forward.

We continue to expand our portfolio of linkers and self-killing agents. We work on that to expand the range of cancers that can be effectively treated with TAP compounds, extending the opportunity into cancers with multi-drug resistance, for example, or those that are less sensitive to [tubulin] acting agents. This also enhances our capabilities to advance our own product programs.

Let me first turn, with our product programs, to IMGN901, which is our most advanced, and which also known as Lorvotuzumab Mertansine. This is in development by us for the treatment of CD56-positive cancers. This is a diverse group of cancers that includes both prevalent cancers such as small cell lung cancer, ovarian cancer, and multiple myeloma, as well as rare cancers such as Merkel-cell carcinoma and NK lymphomas.

Our IMGN901 development program is designed to provide meaningful data on the safety and efficacy of IMGN901 when used as a single agent for difficult-to-treat CD56-positive cancers. It is also designed to provide meaningful data on the safety and efficacy of the compound when used as part of a combination regimen, since cancer is typically treated with combination therapy. It also supports fast-to-patient approaches, such as development for rare cancers and other cancers with no approved or effective treatments today.

In the area of CD56-positive cancers, there are four that we are particularly interested in today. First, would be small cell lung cancer. First of all, it is a prevalent cancer that almost universally expresses CD-56, and has a high mortality rate, with limited treatment options today. Merkel-cell shares a number of commonalities with small cell lung cancer, including the high mortality rate, and has no approved therapies today. Ovarian cancer is of interest because it's a prevalent cancer in which there's a big need for better treatment options, and our preclinical data in this cancer looked especially exciting. Finally, multiple myeloma, because even though this field is getting crowded, there's a real need for agents that work by other mechanisms of action. Our aggressive development program for IMGN901 is focused on gaining meaningful clinical data in these cancers.

Let me first go through what we are doing in small-cell lung cancer. We now are in the expansion phase of our 002 study, allowing us to gain additional information on IMGN901 used as a single agent. We will report updated findings from this study at ESMO in October. Assessment of IMGN901 as a monotherapy has to be done in patients whose cancer has relapsed after prior treatment -- a notoriously difficult to treat patient population that we have seen nonetheless benefit from IMGN901, but in a heterogenous patient population across two separate studies. Now that we're in the expansion phase for 002, it gives us the opportunity to look at this patient population, a more homogenous population in a narrower protocol that will give us a better picture of the activity and tolerability of 901 in this patient population.

In light of the tolerability of 901, we're also preparing to initiate a study that assesses it as a first-line treatment used in combination with standard of care for small cell lung cancer, and we expect to have this study up and running by the end of this year. Finally, we've applied for orphan drug status in small cell lung cancer in both the US and EU, and the responses are pending.

For Merkel-cell carcinoma, we're also gaining additional information on IMGN901 in this indication, in the expansion phase of our 002 study. Updated findings in Merkel-cell will be included in the presentation at ESMO. We intend to make a go/no-go decision at the end of this year on the initiation of a pivotal trial assessing IMGN901 for Merkel cell. That decision will be informed by our experience with IMGN901 for Merkel-cell in our 002 study, and by our overall clinical experience with the compound. There is, as noted earlier, a fast-to-patient regulatory opportunity in Merkel-cell, and, in this particular case, we have already received orphan drug status in both the US and the EU.

For multiple myeloma, we continue to make progress in our study assessing IMGN901, both as monotherapy and as part of a combination regimen. We intend to present findings on one or both of the trials that are underway here at ASH in December. And finally, in ovarian cancer we are continuing to work to bring on centers that will provide ovarian cancer patients with access to our study.

For SAR3419, this is a TAP compound that binds to CD-19 and targets patients with non-Hodgkin's lymphoma. It was developed by us and licensed to Sanofi-Aventis in a broader collaboration. Here, Sanofi has made the decision to advance SAR3419 into phase-two, based on the impressive findings in phase-one to-date, particularly in the weekly dosing study that's underway. They are planning an aggressive phase-two program, and they want to initiate that with the best possible dosing schedule to expedite the advancement to registration trials. They plan to do some additional phase-one work to further refine the dosing schedule, which has shifted the timing of the start of this phase-two study. They expect to be in the position to start phase-two about a year from now. They will then report the phase-one data that shaped their phase-two program at ASH in 2011.

IMGN388 is in development by us for the treatment of solid tumors. The first reported clinical data was at ASCO this past June, and it showed increasing evidence of activity at higher doses. Dose escalation is now completed, with a once every three weeks schedule. Updated results have been accepted for presentation at EORTC, and will include information on the maximum tolerated dose. We are currently gaining additional experience dosing at the maximum tolerated dose, and at the same time are looking at the potential of a more frequent dosing regimen.

We have three other compounds in clinical testing through our collaborations. Two are TAP compounds, one with Biogen Idec, BIIB015, and the other with Biotest, BT-062. Clinical data could be reported on one or both of those later this year. The recent addition is SAR650984, which started clinical testing in June. This is a naked antibody, the only naked antibody in the portfolio that's in the clinic at this point, targeting CD-38, which is expressed on a number of hematological malignancies. Our collaboration with Sanofi includes naked antibodies as well as TAP compounds, and was driven by their interest in accessing our antibody experience. We expect a third compound from our collaboration with Sanofi, SAR566658, to begin clinical testing very shortly.

There are additional compounds approaching the clinic. For many years, recall that our research team was tied up developing a pipeline for Sanofi Aventis. Out of this work, SAR3419, SAR650984 and SAR566658 came out of all of this work. When the research portion of that collaboration ended, our scientists could return to developing novel anti-cancer agents for our own portfolio, and they have been aggressively building and advancing our product pipeline -- our preclinical product pipeline. We are now at the stage where we expect to have a regular flow of our compounds into the clinic. We expect to submit an IND for our next wholly-owned compound in 2011, and for the one behind that, in 2012. The first of these, which we have designated IMGN529, is a TAP compound for certain hematological cancers. Beyond these, we expect two to three more compounds to enter the clinic in 2011 through our existing collaborations with other companies.

Finally, let me comment on business development. We're delighted with the success our technology and our support have enabled our partners to achieve to date. Roche obviously sees T-DM1 as a very large opportunity, and they mentioned peak sales here at being between CHF2 billion to CHF5 billion Swiss francs. SAR3419 targets the Rituxan market, potentially a very big opportunity for Sanofi.

The other four compounds I have noted, and the undisclosed preclinical compounds in development with our partners are at earlier stages, so they're harder to dimension in terms of scale, but, again, could be very large. But we intend to enter into collaborations with other companies as well, but there are some constraints there. We're committed to doing only a limited number of additional deals, as we don't want deal activity or supporting partners to interfere with expanding our own product pipeline. And at the same time, we're insisting on terms that reflect the progress and depth of our technology, which we think is significant, and taking that stance does have a tendency to extend the negotiation process considerably.

All that said, we think that there are discussions underway on a number of fronts that are very constructive. We would like to think that they will lead to a constructive conclusion, but unfortunately that's very difficult to -- to come up with a firm timetable or dimension, but we are pleased with the progress that we're making on that front.

So, with those comments, let me turn it over to Greg to go through the financials.

Thank you, Jim.

Our net loss for our fiscal year ended June 30, 2010 was $50.9 million, or $0.87 a share, compared to our net loss of $31.9 million, or $0.63 a share, for 2009 fiscal year. This difference in net loss is principally due to lower revenues in fiscal year 2010 compared with fiscal year 2009. Our revenue in our 2010 fiscal year was $13.9 million, compared with $28 million in our 2009 fiscal year. 2009 revenue included a number of milestone payments, two of which totaled $10.5 million, that we earned with our partners' progress. Our partners continued to make excellent progress this past year, but the timing of milestone triggering events yielded just $2.5 million. We expect higher up-front and milestone payments in our 2011 fiscal year, which is reflected in our guidance.

One key contributor in fiscal year 2011 is the anticipated approval of T-DM1, which would trigger a milestone payment to us, as previously disclosed. We are also expecting to record our first royalty revenues associated with T-DM1. We expect them to be quite modest this first year, given the potential approval timing.

Our expenses in our 2010 fiscal year were $65.2 million, compared with $59.8 million in our 2009 fiscal year. This increase in expenses was principally due to our having greater R&D expenses in our 2010 fiscal year, as we increased investment in our proprietary product pipeline. We finished this year with $110.3 million in cash and marketable securities. This includes the $77.6 million we raised from the sale of just over ten million shares at $8 per share to new and existing holders in our public offering in May, an offering we were able to upsize due to the strong interest in ImmunoGen, despite the difficult market conditions on that day.

Looking forward, our guidance for our 2011 fiscal year, is that we expect our net loss will be between $50 million and $53 million. Our cash used in operations will be between $34 million and $37 million, our capital expenditures between $2 million and $3 million. And we expect to end our fiscal year on June 30, 2011 with cash and marketable securities of between $74 million and $77 million. This guidance reflects that we believe our cash used in operations peaked in our 2010 fiscal year, and will now start to trend lower, as cash received from our partners trends higher. Initially, most of this cash inflow will continue to be from upfront and milestone payments. But we expect to see the first modest contributions from T-DM1 royalties late in our fiscal year 2011. Longer term, we expect the higher cash inflows to more than offset any increased investment in our proprietary pipeline.

As Dan mentioned, we continue to see a high level of interest on the business development front. Consistent with past practice, we have included just a modest contribution from the anticipated BD activity in our 2011 guidance. With our recent financing and our commitment to developing our proprietary pipeline, we remain firm regarding business development opportunities. We are only interested in doing a deal that makes sense for ImmunoGen, and reflects fair value for our technology.

A number of leading pharmaceutical companies have increased investment in the antibody field in the past few years, and they've certainly noticed the difference a technology can make to an antibody. It is particularly helpful that the leading ADC, which is in front of the FDA, is a compound that uses ImmunoGen's linker and cell-killing agent. It also helps that T-DM1 is being developed as a replacement for a $5 billion drug, Herceptin.

Now, I would like to turn it back to Dan.

Thanks, Greg.

Let me wrap up ahead of the questions, just taking you through a summary of what we see taking place over the next six months that will be important events, and I'll start with what should be taking place on the regulatory front with T-DM1. As I noted, that was put in front of the FDA on July 6, so by statute that would suggest that a decision would be coming out of the FDA prior to January 6, 2011. Some time before that, there would -- there should be an ODAC panel, this being a new molecular entity, that would, again, require an ODAC, and we don't know the timing, but that would be probably some time this Fall.

I referenced a lot of clinical data coming forward. At ESMO, we should see T-DM1 data out of their Phase II first-line study. That would be the study that would be comparing T-DM1 head-to-head with Herceptin plus Taxotere. We also would have solid tumor data on IMGN901, looking at both Merkel-cell and small-cell. We should have clinical data at EORTC on IMGN388. At ASH, we'd be looking for clinical data on both our single agent and combination study with IMGN901 in multiple myeloma, and then we would look to see further T-DM1 data at the San Antonio Breast Cancer Symposium towards the very end of the year.

There should be two new studies that would be starting, and that would include the new Sanofi compound that I referenced, that is awaiting dosing of its first patient. You also heard me indicate that we would be starting our small-cell lung cancer combination study some time prior to the end of this year, so we're gearing up for that.

And finally, again staying on the clinical front, we should have enough information to make a decision about whether we're going to move forward with a pivotal study for Merkel-cell, sometime within the next six months.

Business development, to reiterate, it's difficult to gauge timing, but I think if we open the window to six months, I would be hopeful that we could see a deal come to conclusion certainly within that period of time. There's also the potential for updates on a couple of other fronts with T-DM1, to the extent Roche decides they want to disclose interim data on the second-line phase-three trial, or if they come to some conclusion and want to make public their plans around agivent, that's another possibility, as well as the opportunity for clinical data to be presented on two other compounds with our partners, the Biogen-Idec compound or the compound with Biotest.

So, a lot of information, a lot of opportunity for information to shed light on what's going on in some very important compounds over the next six months, and we're excited with everything that's going on.

So, with that, let me turn it back to Carol, and she can help us with the Q&A.

Great. Thanks, Dan. We're about to open the call to questions. I'd like to ask our analysts to limit their questions to one to two questions per person, until everyone has had a chance to ask questions, and then you can come back in the queue.

Operator, we are now ready to open the call to questions.

Thank you.

(Operator Instructions)

We will go first to Shiv Kapoor with Morgan Joseph.

A couple of questions to start with. One, on IMGN901, can you go over a little bit of the clinical design for the Phase III that you are -- that you are planning for later this year in small cell lung cancer? Specifically, will these be limited or extended-stage disease patients?

Shiv, it's Dan. You said Phase III, it is actually Phase I/Phase II study in small cell lung. So, what that will mean, these will be first-line patients. We will go through dose escalation. It will be -- there will be two arms to the study, all patients will get the etoposide and cisplatin, and one arm will also get IMGN901, and as we dose escalate, the arm that gets 901 we will determine what MTD is, and then dose an expansion cohort. I don't have the numbers offhand. I want to say the expansion cohort would be something in the 40 to 60-patient range, that would be the Phase II portion.

But we think it's important here to be looking at first-line patients, and some of that comes out of our experience in the 002 study, where, while we saw activity, unfortunately, patients after they've relapsed from first-line study, it's difficult to, in some cases, find patients, and the physical status is difficult. So, based on our own view, as well as consultation with a number of experts in the field, the assessment was to look at first-line patients.

One other dimension that we may look at as we go into the study, I am not sure if it is part of the initial protocol, is whether we want to -- in the 901 arm, to look at potentially, after patients finish their regimen that would include all three therapies, to keep them on 901 as potential maintenance therapy. I don't know that we've finalized that element of the protocol.

Okay. On IMGN529, can you talk about the target of the antibody and perhaps the linker technology?

Not just yet, Shiv. That's something we'll be very happy to talk about when we are a little bit farther along, but we are not ready to discuss that just yet.

Okay. Thanks.

We'll go to our next question from Pamela Bassett with Cantor Fitzgerald.

Thanks for taking my question. Congratulations. Great developments. Staying with 901 for a minute, will you talk about how -- can you talk about how the go/no-go decision for Merkel cell will impact the overall program development for 901, if at all?

Well, that wasn't what I intended to convey. I think it maybe goes the other way a little bit, Pamela. I think that -- there's kind of two avenues that we want to look at for inputs in that decision. The first is certainly what we're seeing in the Merkel cell data itself, are we continuing to get the level of activity we've seen in those first six patients to encourage us to move to a pivotal study.

But there's a background item that we're going to want to understand as well, and that is we want to make sure -- we want to have the sense of are we on track with some of these other indications, because it just makes it a little bit of a steeper climb to pursue Merkel cell as the sole indication for 901 if -- with the other data, and we are enrolling pretty rapidly in some of the studies, doesn't provide, I'll say, some affirmation or confirmation in other areas. It may simply cause us to say we're not ready with Merkel cell, and we're going to defer, but hopefully we'll see data in one or more of the other indications that provides us the encouragement to say this is a broad opportunity that's going to be limited to Merkel Cell.

So, specifically small cell?

Not exclusively. We could see data coming out of multiple myeloma, because that would offer some breadth of opportunity as well. We could see it coming out of ovarian; we made reference to ovarian in the earlier comments, that, while we haven't yet had success in enrolling ovarian patients, we are taking some steps to approach new centers specifically with the potential of bringing in ovarian patients, because it seems like the institutional structure that exists doesn't allow for those patients, who tend to be treated in maybe a woman's health area within a center as opposed to in the broader oncology or clinical trial area, and so we've had trouble attracting those.

So, we're shifting our strategy, because we want -- because our preclinical data says that that's a particularly sensitive tumor to a Tubulin agent. So it's very important for us to continue to pursue that. So, I wouldn't just limit it to small cell, it can be any other one of the other major indications.

Okay. Great. That's helpful. And finally, will you give us some more detail around your partnering strategy? Have you developed specific criteria? Give us an idea of what a deal might look like in terms of upfront milestones, royalties, and what royalty level? Are we talking double-digit royalty, where you might retain significant ownership of some of the pipeline compounds?

Well, I can't shed too much light on that. I think the reference point I would make for you is the last single target deal that we entered into, which was with Bayer back in late 2008, which had a $4 million upfront, $170 in milestones, and royalties that got into the upper single digits. I think the one imperative word I would provide is "more". You know, the larger up front, larger -- more in terms of milestones, and potentially a healthier royalty structure. I think it also may be -- it may be -- we may see single target licenses. I think that's there's interest in multi-target deals, and so we just have to see which is the -- the path that takes us forward.

When you compare -- I think the justification for being more aggressive is that there's been an awful lot of data that has come forward since we negotiated that deal in late 2008 that says this is no longer an emerging technology, this is a validated technology. I think that the T-DM1 data is irrefutable. I think that the data that we've generated with 901 demonstrates that there is certainly an activity level, and plus we have significant innovations that we've worked on, particularly in linkers, as well as a more refined knowledge base around approaches to take that I think should be reflected in the economics of any new deal. So, I think we have to wait until something comes to maturity to get into greater specifics, but hopefully that gives you a little bit better flavor.

It does. And are we talking about ImmunoGen's proprietary pipeline here, or targets that a potential partner may bring to you, or both?

Those comments would relate to technology transactions. So, it would be the targets in probably antibodies that a third party would be bringing to us. If it was a transaction involving something that we had developed, a product, if you will, whether preclinical or something currently in the clinic, that dynamic would be entirely different, entirely different. So, no buyer is no longer a reference point for something like that; we are in an entirely different arena.

Okay. An important distinction. Thank you.

We have no further questions in queue at this time. I would like to turn the conference back over to Ms. Hausner for any closing remarks.

Great. Thank you very much. We appreciate your -- wait, I am sorry. We now have additional questions. Operator, can you take the additional questions?

Absolutely. We'll go first to Adnan Butt with RBC Capital Markets. Adnan, your line is open.

Thanks. It is Adnan for Jason Cantor. Just a couple of questions. Number one, can you provide, perhaps, some more color on what kind of data you might be presenting at ESMO from the Phase I study in patients with small cell lung cancer, Merkel, et cetera? And number two, can you update also on how enrollment is progressing in the [enriched] patient populations? And then finally, in terms of the financial guidance, could you just clarify what, if any, milestones you are expecting in terms of the year-end cash position for fiscal 2011? Thanks.

This is Greg. On the financial guidance, just to add a bit of color to the guidance, I think one of the things that -- dynamics that is taking place in fiscal year 2011 is that, although, as you can see from the guidance and where we finished in 2010, the net loss is approximately in the same time zone. We do expect to see an increase in revenues, as well as an increase in expense, and we would anticipate the revenues to more approximate 2009 revenue levels; 2009, for reference, was about $28 million in revenue.

Inside of that $28 million of revenue, we would anticipate, for instance, a milestone associated with T-DM1 approval, which we've discussed previously, and on previous calls, and we have sized that at about low double-digit millions, and I believe the (inaudible) Phase III milestone is about $6.5 million, as a reference point. So, that's the largest single milestone that we'd anticipate recording, but there certainly are others as well.

I think the other two questions were around the 901 data to be presented at ESMO, and about enrollment in general. 901, we are in the expansion phase of the -- that would be out of the solid tumor study, the 002 study, and I think what you'll see is -- because we're now at MTD, that provides some opportunity to enroll at a faster pace, since you're not having to wait after each dose escalation. So, what you'll see is an expanded patient population. The specifics from an abstract -- maybe the abstract has been prepared but certainly the [poster] hasn't, of how that gets presented and sliced, I don't think we are at that stage yet. We probably will make an effort to try to segment the sub-populations between Merkel cell and small cell within that data.

Your question on enrollment, enrollment, again, you get a benefit both in 388 and in actually in our other -- in two of our other three studies, the 002, which is the solid tumor study for 901, and 003, which is the monotherapy in multiple myeloma, both -- all three of those are at MTDs, they're at the expansion phase, which just gives you the opportunity to continue to enroll without the gaps of waiting for patients to mature to a degree at each escalated dose.

At the same time, we've continued to add studies, we've run into some, some hurdles with IRBs of getting some of these sites up and running. We seem to be past most of those, and all of that is contributing to expanded enrollment.

A smaller group, but our combination study in multiple myeloma also seems to be enrolling at a pretty good clip. Now, here we are in dose escalation, but maybe I think it's (inaudible) at a good clip based on the contrast of how long it took us to get through some of the bureaucratic processes at the IRBs, but now that we're past that at a number of sites, we seem to be enrolling each successive dose cohort pretty rapidly.

So, look, these things can shift a little bit, but at the moment we're some seeing improving trends in patient enrollment. Our enrollment last year, fiscal '10, was up -- I want to say 60% or 70% up from the prior year, and we're looking for our enrollment to be up another 50%-plus this year. So, we're pretty ambitious with what our expectations are in enrollment, but I think we have the right centers in place and programs to hit those objectives.

Okay. Thank you.

We will go next to Bret Holley with Oppenheimer.

Hello. This is Jay calling in for Bret. I had a quick question on 388, which actually leads me to a more general question, which is, is the Alpha V antibody, is that therapeutic unto itself, or is it just a targeting agent? And then more generally, is there a trend towards antibodies -- naked antibodies that have activity on their own being better or worse, being linked to the DMs?

I don't know that there is data out that would provide us the answer on that. And so, since we're looking at it as a -- as a conjugate, our focus is on that therapeutic agent. So, I don't have data that would say whether that's an active agent on its own. You may have seen the poster at ASCO, but you heard my comments that we have seen what appears to be dose-related activity, in that we are seeing some activity as we get up to higher doses, but it's still early stage; maybe we'll have better insight on that by the time we get to EORTC.

Okay.

I didn't -- I missed your second question.

It was just, in general, is it -- do you seem to have more success, or is there any correlation between the naked antibody having activity, and the conjugate having more or less?

I have to say, that may be a little bit of an open question as well. You know, the fact that -- I don't know if you're thinking of T-DM1 and the studies that have disclosed thus far, given that there is a lot known about trastuzumab, is that indicative, or can that be extrapolated broadly? I think the comment I would make, if that's part of where the question is coming from, I would remind you that in the patient population that we have seen thus far with T-DM1, these patients have progressed while on Herceptin, and so therefore, if it was active at one time, it has now fallen below a therapeutic level. I'd also point out that trastuzumab, as an antibody itself, it is not a terribly active agent. It is shown to be very effective in combination with chemotherapy, but on its own, I don't think anyone would view that to be a significantly active agent.

Okay. Thank you.

We will take our next question from David Miller with Biotech Stock Research.

Hello. Thanks for taking my questions. Most of mine have been asked, so I just have a follow-up question. I wanted to make sure that I heard correctly, that Phase I/II first-line small cell lung cancer trial for 901, this is a randomized trial design?

It is.

Okay. And then, the other question I had is probably for you, Greg, is just to, kind of housekeeping, to understand the offsetting partner cash in your cash flow assumptions. Do I have the offsetting cash list correct of milestones, T-DM1 royalties, as well as new BD activity?

So, let me just kind of run through, the milestones are generally going to be recorded in the P&L as revenue at the time that we receive them. So it is in the P&L and then cash. The royalties would be the same. The only difference that you'll see between the two generally is going to be on an upfront. We would be amortizing upfronts over some period of time; generally, it is six years or so. Of course, you would be receiving the cash immediately.

So the dynamic that you see in the next year, in this current fiscal year 2011, is that you'll see the net loss being about the same as 2010 on higher revenue, offset by higher expenses, and then you will see cash used in operations will be a bit lower than this year, and that is driven by some of the upfront discussions.

All right. But you are assuming cash in from as yet unsigned business development activity, right?

Right, and that has been our past practice, we generally have some nominal amount of BD activity in there.

Just a point of caution on that one, David. To the extent you're trying to reconcile between net loss and cash used in operations, and think that the gap there represents what is coming in partner deals that isn't recognized in revenues, appreciate that we tend to have a reasonably large noncash element that falls -- that sort of gets us between those two numbers. I don't recall it specifically for the upcoming year, but it is probably north of $10 million, when you take noncash charges like depreciation and also add in stock compensation expense. So I don't want -- you know, just a caution, don't head down the path that the difference is going to be all partner non-recognized revenue that is in our forecast.

Understood. One of the nice things about being an independent firm is we don't have to do EPS stuff, so I was just looking for -- making sure I understood what was in your cash assumptions for the next year, so -- but I appreciate the clarification.

Sure. Let me come back to Jay's earlier question, because there's another aspect that maybe I should have thought of at the time. If you look at, for example, our 901 compound, that is not active antibody on its own. So, clearly, as we are seeing activity in various cancers, it is clearly coming from the conjugation, since you don't get anything out of the antibody. We do see, quite frankly, the broad opportunity here to address cancers that don't -- to utilize antibodies that don't have activity on its own. So we don't view an active antibody as being essential for a successful conjugate, and we think we have examples of that, and we think our technology can simply make use of the targeting capability of the antibody to deliver an effective therapy.

We will go to our next question from Shiv Kapoor with Morgan Joseph.

Thanks for taking my follow-up. I wanted to ask you if you were surprised by the FDA's action, they basically accepted the T-DM1 as a BLA, not NDA? And an additional question related to that, are you making any changes in your research platform to enable your technology, now that it seems like most of the compounds will go through a BLA, can be used eventually for life cycle management of antibodies?

I guess to the latter question I would say no, Shiv, we are not. I don't think that -- I think that, frankly, Herceptin, to some extent, or trastuzumab, is -- for marketed agents today is probably the exception rather than the rule. Maybe Rituxan could fall into that, but so many of the antibodies that are out there just aren't conducive to using in a conjugate.

But, BLA versus NDA, were we surprised? Yes, a little bit, because we had heard the -- we had understood from a number of different sources that this was going to end up down the NDA path. We know that -- that wasn't the preferred approach that Genentech was looking for, and apparently was able to put compelling arguments if front of the agency, to say that this should be submitted as a BLA.

The open question is, does that establish a precedent for all subsequent conjugates, and I think that's open right now. We don't understand what the criteria -- what the criteria were that had -- that convinced the FDA that T-DM1 should be accepted as a BLA versus an NDA; it's something that we're working to understand better. But to your fundamental question, were we surprised? Yes, somewhat, but actually quite pleased that that's an avenue.

Okay. Great. Thanks a lot.

Sure.

That ends our Q&A.

For real, this time.

For real, this time. We appreciate your interest, and invite you to call me at (781) 895-0600 with any additional questions.

I will just mention, we are at the BMO Conference tomorrow, so you can listen to the live webcast of that conference tomorrow. We are actually heading to the airport now.

And have a good night. Take care.

This concludes today's conference. Thank you for your participation.