ImmunoGen Inc (IMGN) 2016 Q4 法說會逐字稿

Good day, and welcome, everyone, to the ImmunoGen fourth quarter and fiscal year 2016 financial results conference call. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the executive director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Thank you. Good morning, and welcome to our first quarterly call with our new president and CEO, Mark Enyedy. This call has accompanying slides that can be downloaded from the Investor section of our website, ImmunoGen.com. Also, earlier today we issued a press release that includes a summary of our recent progress and our financial results for the quarter and fiscal year ended June 30, 2016, which is also on our website.

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

On our call, Mark will provide an update on ImmunoGen strategy; our chief development officer, Dr. Charlie Morris, will discuss our pipeline; and our chief financial officer, Dave Johnston, will discuss our financial results and guidance. We will then open the call to questions. Mark?

Thanks, Carol, and good morning. I joined ImmunoGen in mid-May, and I'm excited to be here this morning to review with you the significant progress we've made with the business over the last 90 days. Before covering our activities for the quarter, I thought I'd start the presentation today by highlighting what attracted me to ImmunoGen and why I see this company positioned for sustainable value creation.

Moving to slide 5, biotechnology is a knowledge-based sector, and success in our business begins with great people. To that end, I have inherited a strong team at ImmunoGen, both homegrown and drawn from premier companies across the industry with deep experience in developing, manufacturing and commercializing oncology therapies. That team has established a leadership position in ADCs, which are an increasingly important approach to cancer therapy with a number of agents in development more than doubling over the last five years.

To this growing field, ImmunoGen brings a robust portfolio of four clinical candidates and continued innovation with ADC technologies. Our portfolio is led by mirvetuximab soravtansine, a first-in-class, fully receptor alpha-targeting ADC entering Phase 3 testing for platinum-resistant ovarian cancer, a patient population with limited therapeutic options. Behind mirvetuximab we built a productive platform that continues to generate differentiated ADCs, including 779 for AML, which integrates our new IGN payload, and 529 for DLBCL, which has generated striking preclinical data and is now in a Phase 2 trial in combination with Rituxan. Levering this platform we've entered into a number of high value partnerships with leading companies, such as Roche, Bayer, Amgen and Takeda. Collectively, our partners are developing nine clinical candidates that deploy our technology.

Finally, to support these activities, we strengthened our balance sheet significantly last quarter and started the current fiscal year with almost $250 million in cash. So, I am excited to be at ImmunoGen. With a combination of talented people, robust portfolio and a strong cash balance, this company is well positioned for sustainable value creation for our patients, employees and shareholders.

Moving to slide 6, realizing on the promise of this business requires clear strategic direction and priorities. Our goal is to build a fully integrated biotech company that delivers innovative ADC therapies to cancer patients around the globe. To attain this goal, we are focused on four strategic priorities. Number one, we are committed to executing on a speed-to-market strategy to complete the development and obtain full approval for mirvetuximab in platinum-resistant ovarian cancer. We took an important step towards that objective last month, as we'll discuss in a moment.

Second, we will accelerate the development of our early-stage portfolio with an emphasis on ADCs employing our new DNA acting payloads. With a potentially broad therapeutic index, we believe we can markedly increase the number of cancers addressable by ADC therapies with this technology. Third, building on our leadership position, we will continue to drive innovation in ADCs through unmatched depth and breadth of expertise in new payloads, linkers and methods of conjugation. Fourth, we will continue to lever our platform to support our existing relationships and pursue new collaborations to expand the reach of our innovation, generate revenue, mitigate expenses, and most importantly, expand our capabilities to enable more patients to be treated with ADCs deploying our technology.

Having defined our strategic direction and corporate priorities, we are now undertaking a comprehensive review of our operations to ensure that we execute efficiently across the business and most effectively manage our cash. We expect to complete this review this quarter, and I look forward to sharing with you the output in the coming months, as well as our continued progress on the core elements of our strategy, which I'm going to cover in a bit more detail in the coming slides.

We have established a leadership position in ADC and we'll build on that position by delivering on our proprietary portfolio, supporting our partners, and continuing to innovate. Slide 7 illustrates our internal pipeline, which offers a diversified and differentiated portfolio of novel ADCs, addressing both solid tumors and hematological malignancies. We have made significant progress with this portfolio in recent months, including a positive meeting with the FDA to review our planned Phase 3 FORWARD I study for mirvetuximab. Based upon the guidance provided by the agency, we will initiate FORWARD I as designed and expect the first patient to be dosed in this study before the end of the year. We enrolled our first patient in the Phase 2 study of 529 in combination with Rituxan for diffuse large B-cell lymphoma, and we initiated clinical testing of 779, which deploys one of our IGN payloads. Charlie will provide additional context for these clinical achievements in a minute, so I'm going to touch on the innovation and partnering components of our strategy to conclude my initial comments this morning. Moving to slide 8.

Extending our leadership position will require continued innovation. To that end, we bring more than 20 years of experience in the development of new ADC technologies and have translated that experience into material advances in the field, including Kadcyla, deploying our DM1 payload and one of our noncleavable linker in the first ADC to demonstrate its survival benefit in solid tumors. Anetumab ravtansine, deploying our DM4 payload with one of our cleavable linkers, and now in a registration-enabling Phase 2 trial for the treatment of mesothelioma. And mirvetuximab, also deploying our DM4 payload with a new charge linker we developed to counter multidrug resistance. Building on this strong legacy, we will continue to apply our expertise to extend the reach of ADCs to multiple cancers within both solid tumors and hematological malignancies. Moving to slide 9.

Partnerships remain a core component of our strategy. These relationships allow us to enhance and diversify our expertise, gain access to supplemental technologies and capabilities, and extend our platform to a broader range of patient populations. Takeda, for example, is developing a GCC-targeting ADC with one of our DNA-acting agents that will move this payload into solid tumors. Partnerships have also generated significant revenue for ImmunoGen, and going forward we expect to use collaborations also to provide a measure of risk in cost-sharing. So, with that I'll turn the call over to Charlie to discuss our progress with mirvetuximab and our other clinical programs in greater depth.

Thank you, Mark, and good morning, everybody. Moving to slide 11, as you've heard, executing on the speed-to-market strategy for our lead program, mirvetuximab soravtansine, is a top strategic priority for ImmunoGen. Mirvetuximab soravtansine is a highly differentiated agent in development for prevalent cancer with limited treatment options today, and is Phase 3 ready, as you'll see on slide 12.

FORWARD I reflects the fastest path to potential approval for mirvetuximab soravtansine as a single agent therapy. And we are advancing Phase 3 based on the sizable database that supports its advancement, demonstrated clinical meaningful single agent activity which supports its moving into a controlled randomized trial that can assess whether its activity is better than the single agent therapies available today, and an appropriate patient population having been defined.

At ASCO we presented findings from a prospective assessment of mirvetuximab soravtansine for the treatment of folate receptor alpha-positive, platinum-resistant ovarian cancer. The agent demonstrated meaningful single agent activity in the full 46 patient cohort with a 26% confirmed response rate and medium progression-free survival of 4.8 months. Standard single agent therapy today usually has a response rate below 20% and progression-free survival below four months.

While the study investigators at ImmunoGen were very happy with these findings, the patient population for a Phase 3 trial should be more tightly defined than what was used in this signal finding assessment. The inclusion criteria allowed enrollment of patients with platinum-resistant disease with folate-receptor alpha positivity with low, medium or high folate receptor alpha expression. As significant and possibly more significant, patients received a wide range of prior regimens, anywhere between one and five. Half of the patients enrolled have received three or fewer, and half have received four or five. The learning from these data enabled us to further define a specific patient population for the Phase 3 trial. Patients who received up to three prior regimens were more likely to respond than the group overall, and those who have at least medium FR-alpha positivity had the greatest likeliness of responding. Based on patient screening and public data, we estimated approximately 60% of patients with ovarian cancer have at least medium FR alpha expression with 40% having high expression. This finding benefits us in terms of prevalence. Studying mirvetuximab soravtansine in this earlier line setting in a Phase 3 trial expands the relevant population to around 5,000 to 7,000 patients per year in the US with a comparable number in Europe.

We recently shared all of this information with the FDA -- the safety data that demonstrated activity, and our planned Phase 3 trial including the selected patient population. This was a positive meeting. And with the benefit of feedback from the FDA, we are moving forward to initiate the Phase 3 trial as planned before year-end.

Moving to slide 13, as a reminder, FORWARD I will be a randomized controlled Phase 3 trial and with 333 patients will be randomized 2-to-1 to receive either mirvetuximab or the physician's choice of (inaudible) therapy. The choice will be among Doxil, topotecan or weekly paclitaxel. To be eligible for enrollment, patients will need to have platinum-resistant ovarian cancer previously treated with up to three regimens, and have high or medium FR-alpha expression on their tumors. The primary endpoint of the trial is progression-free survival, which will be assessed separately for the patients with high FR-alpha expression, and for all study patients.

To put this trial into context, Avastin is approved for use in combination with chemotherapy for platinum-resistant ovarian cancer treated with up to two prior regimens. And so patients may have received Avastin, if appropriate, prior to entering FORWARD I. We will be bringing on approximately 125 clinical sites in the US and Western Europe, with the ramp-up in the US benefiting from the partnership with the GOG Foundation. Patient enrollment is on track to begin before year-end.

Turning to slide 14, to execute on the speed-to-market strategy, we will also be assessing a mirvetuximab soravtansine combination regimen. This is underway in our FORWARD II trial, as shown on slide 15. The cohorts currently open in FORWARD II are the (inaudible) assessments with Doxil, Avastin and carboplatin. We have successfully completed those findings with Avastin and have started Phase 2 testing of mirvetuximab soravtansine with Avastin in 35 patients with Avastin-naive disease. The activity of this combination in preclinical testing was very impressive. If mirvetuximab soravtansine also has a good safety profile with carboplatin, we will open a cohort to assess a triple combination of this ADC plus Avastin plus carboplatin. The cohort assessing mirvetuximab soravtansine with carboplatin is the first use of the ADC in platinum-sensitive patients and part of our broader strategy of moving mirvetuximab into earlier lines of treatment.

We are also preparing to begin testing mirvetuximab in combination with Merck's CD1 inhibitor, Keytruda, in the near future. There are intriguing preclinical data on the combination of maytansinoid ADCs such as mirvetuximab using combination with checkpoint inhibition. We expect to begin reporting data from FORWARD II at ASCO next year.

As Mark noted, one of our strategic -- on slide 16, one of our strategic priorities is to accelerate the development of our earlier stage portfolio. In April we announced that we had initiated Phase 1 clinical testing of our CD33 targeting ADC, IMGN779 in acute myeloid leukemia. This trial is evaluating two alternative dosing schedules, and then we will move forward with a selected schedule into expansion cohorts. We have been asked about the difference between IMGN779 and other ADCs directed at the CD33 target, and the key difference lies in our payload's ability to alkylate DNA without cross-linking it, which we believe will allow for an improved tolerability profile and ability to repeat dose. We look forward to report the first clinical data with IMGN779 in 2017. Notably, this will be the first clinical data with an ADC utilizing our IGN payload family.

We have also advanced our CD37 targeting ADC, IMGN529, into Phase 2 clinical testing, assessing its use in combination with Rituxan based on the striking synergy seen in preclinical assessment. This novel therapy recently received orphan drug designation in diffuse large B-cell lymphoma. I look forward to keeping you up-to-date on the advancements of our lead candidate and the progress of our exciting earlier stage programs. With that, I'll turn the call over to Dave now to talk about our financials.

Thanks, Charlie. Our financials are shown on slide 18, and were discussed in some detail in our press release issued this morning, so with that, I'm going to review the highlights and then review our guidance through December 31. Effective January 1, we are going to be changing our reporting period from a fiscal year ending June 30, to the calendar year, which ends, obviously, December 31. And we're doing this to bring our reporting calendar into line with the vast majority of biotech companies. So, with that, onto a summary of our financial results.

Revenues for the fiscal year 2016 were $60 million, and of this revenue from license and milestone fees were $27 million in fiscal 2016, made up of $9 million of amortization of previously received upfront fees, and $18 million of revenue from partner milestone payments. Revenues in the fiscal year also included $25 million of noncash royalty revenue on sales of Kadcyla. As a reminder, the royalties pass to the purchaser of the royalty stream, and we report noncash Kadcyla royalty revenue that is partially offset by noncash interest expense. Operating expenses in 2016 were $184 million, and these consisted of $147 million of R&D expenses and $37 million of G&A expenses. For the fourth quarter of the fiscal year 2016, ImmunoGen reported net loss of $45 million, or $0.51 a share, and for the full fiscal year, ImmunoGen reported a net loss of $144 million, or $1.65 per share. In fiscal 2016, cash used in operations was $125 million, and capital expenses were about $10 million.

We ended the fiscal year with approximately $245 million of cash and cash equivalents, and $100 million convertible debt outstanding, reflecting our financing transaction, which we completed in June, that provided us with net proceeds of approximately $97 million. We are going to be managing expenses to enable this cash balance to last for two years, covering a number of varying inflection points as we advance our wholly-owned pipeline.

We also provided guidance for the six-month period, the stub period, from July 1 to December 31 in our press release this morning. For reporting during this period, we are going to be filing a 10-Q quarterly report as normal for the quarter ending September 30, and an annual report 10-KT for the full transition period ending December 31. Then beginning calendar year 2017, we will file 10-Ks and 10-Qs on a calendar year basis, and we will provide the guidance for calendar year 2017 shortly after the start of the year.

So, turning to our guidance for July 1 to December 31, 2016 period, we project revenues to be between $40 million and $45 million, operating expenses to be between $95 million and $100 million, net loss to be between $55 million and $60 million, cash used in operations to be between $65 million and $70 million, and capital expenses to be between $2 million and $5 million. And we expect to end the six-month period with between $172 million and $175 million in cash. With our recent financing, we're in a solid cash position which will enable us to execute on the strategy outlined by Mark. With financial discipline, we believe we are sufficiently funded to advance our programs through several important value inflection points. So, with that, I'll turn the call back over to Mark.

Thanks, Dave. And as we execute on our strategy, we expect to achieve a number of important milestones over the next 12 to 18 months, which are set out on slide 20. First and foremost, we will be enrolling our first patient in the FORWARD I Phase 3 trial with mirvetuximab before the end of the year. In our FORWARD II trial, we will be opening the cohort assessing mirvetuximab with Keytruda this quarter and continuing to dose patients in the three other cohorts already open. We're on track to begin reporting from FORWARD II in the second quarter of 2017, with a steady flow of updates anticipated thereafter. We are also submitting several abstracts to ASH with intriguing preclinical data on 779, 632 and 529, and we will be reporting the first 779 clinical data in 2017. Our partners are also making progress and we expect another partner program to enter registration studies this year.

Turning to slide 21 and coming back to my comments at the start of the call, I am excited to have joined ImmunoGen as we transition to a fully integrated oncology company. We are a leader in a growing field with a cutting-edge technology, a rich pipeline and differentiated product candidates, a talented and experienced management team, strong partnerships, and a number of upcoming milestones. With a clear set of priorities and the recent strengthening of our balance sheet, ImmunoGen is well positioned for sustainable value creation for our patients, employees and shareholders. And with that, I'll turn the call over to Carol to open up for Q&A.

Great. Thanks, Mark. We are about to open the call for questions. We ask that these be limited to one to two questions per person until everybody has had a chance to ask questions, at which point you can come back into the queue. Operator, we are now ready to open the line for questions.

Thank you. (Operator Instructions) And we'll take our first question from John Newman with Canaccord Genuity.

Do you want to go to the next question?

And we'll take our next question from Simos Simeonidis of RBC Capital Markets.

Kind of a mechanism-related question. The 6.7 months of PFS that you saw with the population you are going to do the Phase 3 in is the same as the population with the low expressers, and the response rate is also fairly similar. Can you help us understand that, or tell us what you think about that?

Charlie?

I think when we think about the population, Simos, the number of patients in this dataset with low expression is relatively small. And what we wanted to do was to really give ourselves the best shot at positivity for the overall study. So, clearly, there is some activity in the low group, but whether it is truly the same as those in the medium and high expression I think remains to be seen. So, what our view is that the medium and high expressers you would certainly expect based on mechanism of action to be susceptible the (inaudible) drug, and therefore let's go ahead in lows, because we can always do more work in the low population at a later time. But the highest probability of success has to be in the highest expressers based on mechanism of action, based on preclinical data. And we thought rather than increasing the risk in the trial by having all-comers, we would really maintain the medium and high and give ourselves the extra shot with the analyses of both the high and medium populations.

Okay, great. Then in terms of your meeting with FDA, you describe it as a positive meeting. Can you give us any highlights or talk about what they liked about the data and concerns? I know the endpoint was describing the slides as significant improvement in PFS. And then you also say in high expressers only or in all patients. Can you talk about that point?

Rather than speaking on behalf of the FDA and especially, you know, they have 30 days from the meeting to give the final minutes, let me -- I'll talk about what the main points of discussion were. We talked about the acceptability of progression-free survival as a primary endpoint for approval. They accepted it and said that was an appropriate endpoint. We asked whether the size of the safety database that we will present at the time of submission of the BLA would be appropriate, and they said it was certainly the size of databases that they've been able to approve. But as FDA would always say, they said it's a review matter and therefore they'll consider that at the time. We asked about the statistical plan, they were accepting of our statistical proposal. So, all of those key elements, the key design elements, the key things that we were focused on, the population that we would be signing were really the things that we wanted to get at to discuss with them and get their feedback on, and they were accepting. You know, we described in some detail the design of the FORWARD I trial previously and it's going to proceed exactly as we previously described. So, obviously we were very pleased with that as an outcome.

And we'll take our next question from Matthew Harrison with Morgan Stanley.

Hi. This is Cyrus on for Matt. So, for this FORWARD I study, when you met with the FDA, did you guys explore any response based endpoints and was the FDA open to any of them? And then, also, for FORWARD I, can you give any guidance on how long it will take to enroll, or any expectations you guys have?

In terms of different endpoints, we feel that the appropriate endpoint for full approval was going to be progression-free survival, and so we didn't sort of lay alternatives out to the FDA. We explored with them whether this would indeed be an appropriate design for full approval, and they were accepting of that as a design. So, we didn't put that question -- an alternative endpoint onto the table. And I'm sorry, Cyrus, I've --

Timing of the data.

Well, what we have said is that we believe it will take around three years to have data from the study. We'll expect to have data in 2019, so obviously it takes a while to get up to full opening of the sites, but I think we would be hopeful that we would have the patients recruited in sort of, hopefully, 18 months or less time frame.

Great. Thank you.

And we'll take our next question from Jessica Fye with JPMorgan.

Hey, guys, this is Ryan on for Jess. Appreciate you taking our questions. As we think about FORWARD I, what are your thoughts on maybe the preferred physicians' choice and, second, how do you think about the variability for PFS in that control arm? Thanks.

In terms of the physicians' choice, and this is speculation, obviously, but I think there will be a fairly even split of patients receiving Doxil or paclitaxel, and just a small number of patients getting topotecan. In terms of the variability, obviously there are patients who have had different numbers of lines of prior therapy. There may be some differences between those two. Those actually have never been clearly established in randomized studies. You would infer from the AURELIA study that there is some better outcome with single agent Taxol, but we're comfortable with the design and based on historic data that we will be competitive with all three of these. That is how we set up the trial, that's how the FDA was comfortable with setting up the trial. So the variability really comes out through the randomization within the study, and I think our objective here is to show that current standard single agent choices hopefully are not as good as mirvetuximab and therefore that's the design of the study meant to show that.

And is it reasonable to assume that the majority of them will be two plus lines of therapy, i.e., we will probably not see too many first-line, or patients with only one line of prior therapy?

I suspect that's a reasonable assumption. About two-thirds of patients, if not more, are platinum-sensitive at their first platinum treatment, so the majority of patients will get a second round of platinum before they become platinum resistant. So, I think one prior line will be a minority, but I think there will be some in there.

Great. Thank you.

And our next question comes from Boris Peaker with Cowen and Company.

Good morning. I'm just looking at the Catalyst and I don't see the endometrial study in the presentation. Is that still planned or is that no longer in the plan?

Obviously, we have been completing the initial cohort in the Phase 1 and intend to present those data next year. At this stage, based on resources we have and based on the strength of the signal that we have in ovarian cancer data, we've really taken that as our key focus at this point. Endometrial is something that we'll come back to, but our operational priority right now is to get FORWARD I started.

Gotcha. And speaking in terms of resources and operating expenses, so your cash operating guidance for the second half of 2016 is about $65 million to $70 million, and Mark noted in his opening remarks that you plan to invest more in your earlier stage pipeline. I'm just wondering, can we extrapolate that for the full fiscal 2017, which is going to be on a calendar basis, and can we talk about maybe close to $150 million in cash operating expenses?

Go ahead, Dave.

Hi. Dave here. I wouldn't necessarily do that, because as Mark also said, we're taking a real close look at the operations in general and, as he said, we're going to be reporting on that in the next couple of months. But the idea here is that with the resources that we had in hand, the $245 million, and sort of normal expected milestones and revenues from our partners, with all the things that we're planning on doing, including investing in the earlier stage pipeline, we expect that that should last us for a solid two years. So, that would put us at least till the middle of 2018.

And our next question will come from Biren Amin with Jefferies.

On the ongoing biopsy trial, when can we expect data from that study?

We didn't really mention that. Some point next year. We'll be looking at whether the data is mature enough to put something in for ASCO sometime. We didn't think there was quite enough in the dataset at this time to get something by the end of this year, so I think you're probably looking at ASCO next year.

So, I mean, you're clearly looking at that dataset. Are you incorporating any of the key learnings from that dataset into the FORWARD I Phase 3 trial?

I would say I don't think there's enough in there -- you know, it's 27 patients. So, I think to start trying to infer so strongly that it would directly impact where we are with the study would probably be a bit of a gamble. But obviously we look at the efficacy information that is probably as important as anything in there to ensure that we are continuing to see the levels of activity consistent with where we are. And there is nothing that is making us nervous about the design of the trial.

And then with regards to FORWARD I, how are you thinking about your stats plan? Are you going to evaluate PFS in high expressers initially and then go to all patients? Is this a stepwise plan?

No, it's not a hierarchical approach, so you're able to test both populations without paying penalty.

Great. Thank you.

And we'll take our next question from Michael Schmidt with Leerink Partners.

You laid out some figures in terms of market size of patient numbers for folate receptor alpha patients with medium or high expression. I was wondering if there is data looking at overlap with the BRCA population in ovarian cancer?

We don't have detailed information at this point, Michael, but it's something that we are continuing to explore, and we'll continue to look at the specimens that we obtain. When we think about patients with BRCA mutations, they are often relatively platinum-sensitive, so they may get two or three rounds of platinum before becoming platinum-resistant. So, in our particular populations, I think you could speculate that there may not be a substantial overlap, because though having had a relatively small number of prior therapies and being platinum resistant is probably not the typical phenotype, if you like, for BRCA mutation patients.

Okay, thanks. And then you mentioned the Bayer mesothelioma program and I was just wondering if you can remind us of the economics there, number one, and number two, if there is any information out there in terms of timing for that trial to complete?

Carol?

There isn't -- this is Carol. There isn't any information out there in terms of timing. What has been disclosed is we get milestones potentially totaling $170 million and royalties are between 4% and 7%.

Okay, great. Thanks so much.

And that concludes today's question-and-answer session. I'd like to turn it back over to Mark Enyedy for any additional or closing remarks.

Thank you all for joining us on the call today. We are pleased to report the progress that we've made in recent months and to lay out our strategy to build a fully integrated oncology company delivering innovative ADCs. I look forward to continuing to update you on our progress and thanks again for your time today.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.