Agenus Inc. (AGEN) Q3 2016 Earnings Report, Transcript and Summary

Good morning and welcome to the Agenus Third Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michelle Linn, Vice President, Corporate Communications. Please go ahead.

Thank you. Welcome to the Agenus third quarter 2016 conference call. Before I continue, I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the company’s potential income stream, research and development, and clinical trial activities, the publication of data and potential application of the company’s technologies, and product candidates toward the prevention and treatment of diseases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Reference to these risks and uncertainties is made in today’s press release and they are disclosed in more detail in our most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call and Agenus undertakes no obligation to update or revise these statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. When evaluating Agenus’ business and securities, investors should give careful consideration to these risks and uncertainties. As a reminder, this call is being recorded for audio broadcast. With me today is Dr. Garo Armen, Chairman and CEO, Dr. Robert Stein, President of Research and Development, Jean-Marie Cuillerot, Vice President and Global Head, Clinical Development and Christine Klaskin, Vice President, Finance. Garo will provide a corporate update during the call and Bob and Jean-Marie will provide an R&D -- research and development update and then Christine will review our financial results. We will then open up the call for questions. With that, let me turn the call over to Garo.

Thank you, Michelle, and thank you all for joining us this morning. Throughout 2016, we made notable advancements, both on the strategic front and in the clinic. In the past quarter, we focused our efforts, particularly on our portfolio prioritization and clinical strategy. We developed a strategic plan which prioritizes the clinical development of our monoclonal antibodies, targeting the foundational and validated immune checkpoints, namely CTLA-4 and PD-1. Jean-Marie, who joined Agenus in early July as Vice President of Clinical Development will outline our clinical development plans, which include a particular emphasis on internal milestones, specifically designed to provide rapid clinical efficacy relapse. Jean-Marie, while at BMS and at Merck Serono over showed a clinical development of both BMS Yervoy and avelumab. Of particular note is the fact that avelumab’s development was accomplished at a record three years from first meant to regulatory filing, an unprecedented achievement in this field. One of our key priorities is to pursue our proprietary programs that have the highest potential to yield commercial revenue within the next five years. As you will hear from my colleagues, our CTLA-4 and PD-1 antagonists are the focal point of this strategy. Our objective is to pursue programs that can, as I said, deliver on the objective of generating revenue within the next five years with internal milestones designed to generate near-term clinical efficacy data with relatively modest expenditures to get to the point of de-risking these programs. Our differentiated strategy for both CTLA-4 and PD-1 programs is based on our ability to quickly execute on combinations and our development knowhow, which Jean-Marie will cover shortly. Also, importantly, and not too far behind our CTLA-4 and PD-1 programs is our deep and exciting immune-oncology pipeline of novel antibodies, vaccines and adjuvants. We feel Agenus, along with its current partners and anticipated future corporate collaborators, is uniquely positioned in being able to combine our pipelines of differentiated checkpoints, antibodies with our own foundational checkpoint antagonist, AGEN1884 and AGEN2034, as well as our vaccine platforms, including Prophage, AutoSynVax and vaccine platforms targeting phosphorylated peptide. The ability to combine these modalities based on speed and necessity will be integral to our success. Regarding our efforts to partner key assets, as we indicated previously, we continue having active discussions with a number of companies. While the initial focus after this year’s ASCO conference was on our lead CTLA-4 antagonist, some of these discussions now include potential broader transactions. Among key considerations for us are the financial terms of a potential transaction, both with regard to upfront cash and overall economics, the ability to exploit ex-US potential of our products as well as our ability to combine molecules for our goal to be a commercial staged company in the US in the next five years. We will provide you with additional update as we progress with the aim of coming to a closure on one or more of these business development efforts. Clearly, these business development activities are amongst the highest priorities of our company near term. For those of you who have tracked us in the past three years, the first quarter of 2014 marked the beginning of a series of transformative events for our company. Since then, we have made substantive progress in identifying therapeutic molecules and commencing clinical trials. This has been the result of achievement and fortitude of our world-class R&D team, led by Dr. Robert Stein, who you will be hearing from next. Our commitment to become vertically integrated has streamlined our processes from discovery to cell line development to manufacturing, poising Agenus to expeditiously develop, register and commercialize our products. Our pipeline is broad and provides opportunities for many synergies. With all of this in mind, we foresee a defined roadmap to be a commercial organization in the next five years. With Jean-Marie Cuillerot overseeing our clinical development process, we are more confident than ever in our ability to achieve this goal. In addition, the recent appointment of James Gorman as Head of Strategy will help us with our program prioritization and capital allocation processes, with a focus on most promising lower risk programs first. We will continue to capitalize on our world-class team and on our novel portfolio of leads and programs with an emphasis on combination regimens that are differentiated. In summary, our near-term priorities are focused on clinical development programs that would generate clinical data quickly with a clear path to registration and commercialization. In addition, our near-term priory is also to center around entering into partnerships with an aim to replenish our cash position, to reduce our cash burn rate and have the flexibility to pursue our differentiated strategy in a financially prudent manner. It is now my pleasure to turn the call over to Dr. Robert Stein, our President of Research and Development who will provide an update on some of our preclinical programs. Robert?

Thank you, Garo. I'm very pleased to provide an overview on the progress we are making in our preclinical pipeline that has and continues to fuel our efforts in the clinic. First, as you know, our CTLA-4 antagonist antibody AGEN1884, entered Phase 1 in April this year and it is the only clinical stage antibody therapeutic for this target besides BMS’s Yervoy and AztraZeneca’s Tremelimumab. In addition, our PD-1 antagonists, AGEN2034, is expected to enter the clinic in the first quarter of 2017. Thus, our most imminent goal for 2017 will be to initiate combination studies with CTLA-4 and PD-1 in checkpoint antagonist and designated indications. Jean-Marie will elaborate on our clinical strategy regarding these two key assets subsequently. Antibodies antagonizing these two immune checkpoints have been shown to have distinct synergistic modes of action. CTLA-4 blockade functions in part upstream of PD-1 and enhances activation and recruitment of T-cells into tumors. PD-1 inhibition prevents shut down of activated T-cells and deepens the representation of individual T-cell clones that recognize the tumor, enhancing tumor destruction. In addition, there is now emerging evidence that CTLA-4 blockade facilitates activation of CD4 cells, thus potentially contributing to long-term memory formation and a more stable immune response. This could contribute to the absorbed durability of CTLA-4 antagonist induced clinical responses compared to those induced by PD-1 inhibition alone. All this substantiates the unique mechanism of action that targeting CTLA-4, which is certainly complementary to the activity of PD-1 and PD-L1 antagonist antibodies. Furthermore, we have generated data, which suggests that may CTLA-4 may also be synergistic for combinations with the new generation of novel checkpoint targeting antibodies, a number of which are represented in our portfolio. Overall, we are extremely pleased with the progress we have made in the checkpoint modulator antibody programs, both on our proprietary programs such as those targeting CTLA-4, PD-1 and CCAM-1 [ph] and also with our partnered efforts with Merck on undisclosed targets and with insight on GITR, OX40, TIM-3, LAG-3 and three undisclosed targets. We are excited to have two molecules now in Phase 1 and to have another three antibody programs poised to reach first in man studies within the next six months. On another topic, we are happy to report that GlaxoSmithKline has filed a biologics license application to the FDA towards its shingles vaccine for the prevention of shingles announced just this Monday. The vaccine includes an adjuvant system that contains QS-21 Stimulon, Agenus’ proprietary adjuvant, which we have not exclusively licensed to GSK. The submission to the FDA was preceded by articles published in the May and September issues of the New England Journal of Medicine, reporting on the tremendous efficacy of the vaccine in patients aged 50 years and older and 70 years and older, and GSK’s lowly 50 and 70 clinical programs. The remarkable protection that this vaccine confers against shingles, even in the elderly, highlights the benefits of Agenus’ powerful adjuvant QS-21 Stimulon. This has allowed for remarkable clinical results to be achieved with a sub unit vaccine that doesn't require the use of a live attenuated virus, thus greatly improving the safety of this vaccine. In summary, we are delighted with the progress of our preclinical programs and believe we have a competitive edge due to the rich content of our pipeline and the unique opportunities it presents to potentially offer best in class antibody therapeutics as monotherapies and as components of combination regimens. Next, Jean-Marie Cuillerot, our VP and global head of clinical development will provide an update on our clinical progress and strategy. Jean-Marie?

Thank you, Bob. Thank you, Garo. I'm pleased to have the opportunity to provide an update on the clinical progress we’re making at Agenus. When considering the portfolio as it stands today and the pipeline that is moving forward by the exceptionally talented R&D team, I would say that the breadth and depth of the Agenus assets present exciting prospects. And so, having clinical development at Agenus would be an exciting journey for many years to come. Now, I like to move onto our CTLA-4 programs and the critical role that CTLA-4 antagonist play and we believe we continue to play as a key component of IO treatment regimens. As Bob mentioned, our CTLA-4 antagonist is one of only three such therapeutics in the clinic. The two other clinical CTLA-4 molecules are the product Yervoy that they have developed at BMS and the second is still in clinical development with AstraZeneca. Our AGEN anti-CTLA-4 monoclonal antibody has been in the clinic since April of this year and we are happy to report that we are on track to complete the characterization of its safety profile by Q1 of 2017. Once we have sufficient safety and dosing information, we are planning to file a combination of AGEN1884 with a commercially available PD-1 antagonist in first line solid tumors in which anti-CTLA-4 and PD-1 antagonists have proven activity. This will help us establish a major role in clinical activity for AGEN1884 as compared to that of the clinically validated CTLA-4 antagonist. Validating the strategy and subsequently the clinical activity of AGEN1884 when combined with an established PD-1 antagonist, we would be the first to do this key milestone for our anti-CTLA-4. Beyond AGEN1884, we are anticipating our PD-1 antagonist, AGEN2034 to enter to the clinic early next year. Upon the pharmacodynamics, pharmacokinetic and safety profile of AGEN2034 being established, we will intend to initiate combination studies of AGEN2034 and AGEN1884 in second-line tumor in second part of 2017. We have the expectation to observe a [indiscernible] that what was observed with anti-PD-1 monotherapy in second-line patients. Such studies will provide the opportunity to benchmark the performance of our checkpoint antagonist against that of our competitors. This will be our third de-risking milestone. While targeting to our clinical activity, including [indiscernible] during the second half of 2017. Its clinical activity in second-line tumors looks promising. We plan to initiate studies in treatment naive first-line patients. This strategy is a near-year term goal that should not impose a significant financial burden. In addition, the CTLA-4, PD-1 combination will reduce since it is clinically validated. In the mid-term, we will also be pursuing a differentiated therapeutic approach that targets one or both of the standpoint in combination with our autologous cancer vaccines. Such studies are anticipated to begin in 2018 once we have updated information on AGEN1884 and AGEN2034 combinations. We have an abundance of safety data for one of a proprietary vaccine platform, Prophage and thus feel confident that this strategy should cause a modest risk from both the competitive standpoint as well as the potential for registration. Our third and most approach is focused on leveraging our good pipeline antibodies. As you know, we are working on a number of undisclosed innovative targets at various stages of pre-clinical development. A select few have been chosen and will be combined with monoclonal targeting CTLA-4 and PD-1. The rational affecting this target is based on the particularly high expression levels on the relevant tumor cells or other tumor surface. Now I like to provide an update of our remaining clinical programs. Our partner antagonist [indiscernible] remains on track to enter a clinic before the end of the year. [indiscernible] we plan to initiate additional clinical studies during 2017 including the start of the phase 1 for second antibody targeting CTLA-4 AGEN2041. On the vaccine front, our autologous vaccine programs are progressing rapidly with and our proprietary [indiscernible] vaccine is expected to enter clinical development within the next six months. In summary, registration number of our program IO including our [indiscernible] are expected to enter the clinic imminently. Our priorities going forward will focus on quickly commencing combination and clinical trials in order to move expeditiously towards registration. I will now turn over to Christine.

Thank you Jean-Marie. For the third quarter ended September 30 2016, Agenus reported a net loss attributable common stockholders of $40.8 million. While this is a high number, it is important to note this included unusually large non-cash expenses of $18.7 million primarily related to the fair value adjustments of our contingent obligations. This compares to a net loss attributable to common stockholders for the third quarter of 2015 of $13.2 million which included non-cash income of $4.1 million. This is a $22.7 million increase quarter over quarter solely in non-cash item. The remaining increase in our net loss quarter over quarter of $4.9 million is applicable to the advancement of checkpoint and cancer vaccine programs. Net loss was $0.47 and $0.16 per share basic and diluted for the three month ended September 30, 2016 and 2015 respectively. For the nine months ended September 30, 2016, the company reported a net loss attributable to common stockholders of $101 million which include $35.9 in non-cash expenses. This compares with a net loss attributable to common stockholders of $72.4 million which included $22.5 million in non-cash expenses for the nine months ended September 30, 2015. Net loss was $1.16 per share and $0.95 per share basic and diluted for the nine months ended September 30, 2016 and 2015 respectively. Cash and equivalents, short-term investment were $95.4 million as of September 30, 2016. With that I invite Garo to make any concluding remarks.

Thank you very much Christine, just to clarify on a couple of comments Christine made. As you saw our cash burn while our cash burn increased modestly our net reported loss was significant because of non-cash items in the quarter for the increase in our cash burn accounted for several payments that are non-recurring and also capital expenditure. Going forward, in the fourth quarter of this year, the current plant is a modest reduction in our burn rate. Looking at the future planning for next year we expect a modest increase in our burn rate in 2017 over 2016 until we generate efficacy data in order to pursue registration trails. We also expect the expenditures associated with the pursuance of our novel programs to go up but go up modestly. So in summary, as my colleagues indicated, looking ahead we anticipate substantial clinical trial activity designed to generate efficacy data in order for us to be able to gear up for registrational trail going forward. In addition, as I indicated earlier, we also expect to conclude on our corporate development activity with the prospect of additional partnerships in the months to the year ahead. So with that I would like to turn it over to Michelle and if you have any questions. Michelle?

Thank you Garo, operator you can now open the call for questions.

[Operator Instructions] Our first question comes from Biren Amin of Jefferies. Please go ahead.

May be I’ll start with CTLA-4 1884 program, can you just remind us what the doses are that you’re evaluating in the phase I study. I understand it is a 3+3 design and maybe can you tell us I guess which dose cohort you dose patients still? Thanks.

Jean-Marie Cuillerot?

Thank you for the questions. So we are started phase 1 with very prudent dose of 4.1 mix to fully complete our assessment of 4.3 then moving to one three and ten mgs per kg, I mean instead every two weeks for doses, before moving to maintenance schedule with one injection every 12 weeks. What we’re targeting here is the capacity to combine our anti-CTLA-4 with another anti-PD1 namely AGEN2034. The available data from other checkpoint suggest that appropriate dose of effort to combine with anti-PD1 is anywhere between 1 to 3 mgs per kg. And so we plan to use pharmacodynamics data to understand the pharmacodynamics properties of the combination between 2034 and 1884, namely our proprietary anti-PD1 and anti-CTLA-4 and to benchmark that data with the data that we’re going to produce using commercially available anti-CTLA4 and anti-PD1 for which the data pharmacodynamics data is not available yet but where however there is plenty of people data that will enable us to reach this pharmacodynamics information with clinical activity in first line patients? Are you answered?

And so just as a follow-up to that on your intent to combine 1884 with the commercial PD1 antibody next year which tumor types would you potentially evaluate?

We are going to target the initiation where you have data available but we don’t want to disclose the particular indication that we are getting today.

And Garo, you made some comments on the PDF that the team is undertaking and if I look at your cash position of about 95 million is it safe to say that you probably need to finalize a deal by mid-2017?

I think that would be a very, very conservative estimate Biren, our expectation and hope would be to do it way before that.

Our next question comes from [indiscernible] of H.C. Wainwright. Please go ahead.

This is RK, a couple of quick questions. I’d say, of some of the programs that you discussed today. I'd like to understand what's going on with the PhosphoSynVax program and at what point would you be able to show us some data so that we understand the real potential of this technology especially when we think of this as a way to turn cold tumors into good targets?

Bob?

Hi RK, we anticipate that we will be in the clinic shortly with AutoSynVax which is based off of mutationally derived neoepitopes. Behind that we are working to get PhosphoSynVax into the clinic. We are in the preparation of the IND for that. That would be using the phosphopeptide neoepitopes that aren’t based on mutations and protein sequence but are based on abnormal post translational phosphorylation. Right now we are in validation of those approaches in animal studies which look very encouraging and we should be able to give you more information about that during the coming year.

And also it’s worth noting that while these activities are going on with various projects, there are separate business development activities ongoing for the potential of partnering these programs with at least two partners.

They’ve received quite a bit of interest by partners who recognize the potential significance of the observations and the approaches.

I think it will be very interesting because one of your competitors have already almost getting ready to their neoepitope program started so it'll be interesting to watch both of you folks. This is a question which I'm trying to understand what's going on and I hope Garo you can help me with this. This is specifically do with prophage. In your comments you were talking about how you want to spend more time on your lower programs and get them going, so does that mean there is some kind of hesitancy with prophage on moving it into phase 3 on your own or is there some technical issues that you need to handle before you can go into a larger program, what is the case situation?

Let me answer part of that question and then I will defer it to Jean-Marie. As you know we have had various trials ongoing with prophage and data has matured to a various stages of readouts. However, we have made a statement that we are unlikely to pursue prophage as monotherapy. So plan is to certainly make prophage available as a vaccine to third parties that want to use it in combination and I think it's reasonable to assume that you can expect some developments in that front near term. However, our plans to combine prophage and our vaccine platforms with other enabling checkpoint antibodies is now in the hands of Jean-Marie Cuillerot. And so Jean-Marie could elucidate on when we will reach a certain point of combination data with our foundational checkpoint antibody and will be the right time for us to combine those with our vaccine platform including prophage. Jean-Marie?

So when one looks at the clinical data that we have the exclusivity of prophage is very clearly amplified tremendously when that vaccine is combined which is going to be a success, this is fact number one. Fact number two, we see now that the use of checkpoint inhibitors is becoming very much standard of care in many indication first-line and second-line. On this ground, it becomes seasonal to combine Prophage with the new standard of care what will be these checkpoint inhibitors monotherapy or in combination. Our plan for prophage is as we said to move to the clinics at the end of 2018 when we have fully understood the activity – end of 2017 when we have completely on the characteristic of the combination of our anti-CTLA-4 and anti-PD-1. Then we will pursue by most likely a phase 2/3 that will leverage the fact that we are [indiscernible] and be able to be combined with prophage versus the existing standard of care that will be most likely consist in a CTLA-4 and combined with PD-1 or PD-1 alone. So this is prudent approach that will leverage our checkpoint inhibitor platform but that will provide unambiguous signal of activity should that activity be there.

Thank you that is very interesting following up on some of the data that we have seen with that approach may be very interesting to see how they develop especially in GBM. Thank you.

Our next question comes from Jason McCarthy of Maxim Group, please go ahead.

I just kind of want to keep on prophage just for a second. Could you potentially give us a little bit more color on the third-party sponsored study, would they be enrolling patients based on methylation status as MGMT and maybe give us a little bit more color to the size of the trial and potential endpoint overall survival of progression.

I would love to but we [indiscernible] by confidentiality, unfortunately I cannot comment on this but be on the lookout because these developments are likely to materialize reasonably quickly.

[Operator Instructions] This concludes our question-and-answer session, I would now like to turn the conference back over to Michelle Linn for any closing remarks.

Thank you operator, I'd like to remind listeners that a replay of this call will be available approximately two hours after the call is over and will be accessible from our website at www.agenusbio.com. On behalf of the management team at Agenus I'd like to thank everyone for joining us on today’s call. I'll be available to receive any further enquires following the call with that operator please conclude.

The conference is now concluded, thank you attending today's presentation you may now disconnect your lines. Have a great day.