Agenus Inc. (AGEN) Q1 2017 Earnings Report, Transcript and Summary

Good morning and welcome to the Agenus First Quarter 2017 Conference Call. As a reminder, we will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over Ms. Michelle Linn, Agenus Vice President of Corporate Communications. Please go ahead madam.

Thank you. Welcome to the Agenus first quarter 2017 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 US 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 Chief Executive Officer, Dr. Jennifer Buell, Vice President, Research and Development Operations, Dr. Jean-Marie Cuillerot, our Chief Medical Officer and Christine Klaskin, Vice President, Finance. During this call, Garo will provide a corporate update, Jean-Marie will talk about our clinical plans and deliver both, Christine will provide a financial review and Jennifer Buell will be available for questions on our pre-clinical program, we’ll 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. We’ve had an active start to the year with notable developments both on the corporate front, in the clinic and in research. We took significant actions to focus our programs that support our path to rapid commercialization. Also and importantly in the first quarter we amended our collaboration agreement with insight that resulted in 80 million cash influx and an estimated 70 million reduction in projected cash burn over an 18 month period. This represents a favorable $150 million swing in projected cash requirements over the period. With this amendment right to the novel and differentiated antibody program targeting TIGIT reverted to Agenus. We expect that our antibody against TIGIT will have added advantages when combined with our first generation checkpoint antibodies targeting CTLA4 and/or PD-1, both of which are in clinical development today. In March, we shared news of streamlining our R&D operations with the goal of focusing our efforts on lead programs and the elimination of certain others which we regard as none core at this point. In our efforts to consolidate and streamline our operations, we announced our plan to close our Basel site this year. Key functions from Basel are being transferred to our site in Cambridge UK and to our headquarters in Lexington, Massachusetts. We anticipate that our revised agreement within Incyte and our organizational streamlining, one extends our cash runway beyond what it would have been under the prior agreement terms. Two, allows Agenus to focus on accelerating development and commercialization of assets central to our strategy. These include our PD-1 and CTLA4 antibodies and neoantigen cancer vaccine AutoSynVax and of course immuno-oncology combinations are central to our development, differentiation and pricing strategies. Three, these actions are allowing us to prioritize our preclinical programs involving our novel antibodies such as those targeting TIGIT and 41BB. And four they allow us to focus on commercial and manufacturing preparedness for our most advanced programs through our in-house manufacturing and related services capabilities. On the clinical front, we have made great progress, in under just two years we have advanced four checkpoint antibodies, two of which are with Incyte and our proprietary new antigen vaccine. All five programs from discovery to the clinic, this is a remarkable accomplishment for our company. Just recently we announced dosing of our first patient with our PD-1 antagonist antibody agent 2034, our PD-1 program is an integral component for our overall combination treatment strategy. Separately, at the upcoming ASCO conference we plan to report early safety and efficacy data on our CTLA4 antibody AGEN1884. As you know our phase 1 clinical trial for our CTLA4 antibody started in April of last year. With both CTLA4 and PD-1 directed anybodies now in clinical testing we're anticipating to launch combination trials in the second half of this year. This will be a critical milestone in our clinical roadmap to registration. In parallel we're also pursuing a next generation molecule targeting CTLA4. This is an IGG1 antibody that exhibits a distinct mechanism for CTLA1 antagonism. We believe our ability to discover optimized and engineer antibodies is key to us having a competitive position and provides enhanced therapeutic benefit to patients. Regarding our vaccine programs, our very first neoantigen vaccine AutoSynVax entered the clinic several weeks ago with the enrollment of our first patient. To our knowledge we are one of three companies with a neoantigen vaccine in clinical development. Further, we have a key advantage with our in-house ownership of checkpoint anybodies for our combination plants that involve our vaccines and our check point anybody. We expect early clinical readout of AutoSynVax neoantigen vaccine by year end. We believe that immune education is vital particularly in patients who are unresponsive to checkpoint blockade alone. Hence, the criticalality of inclusion of vaccines for this population which currently constitutes majority of cancer and represents a significant commercial opportunity. It's also important to note that AutoSynVax will use QS-21, our proprietary adjuvant which enabled two key products of GSK to achieve significant clinical and regulatory milestones and their path to near term commercialization. The two products include the world's very first malaria vaccine and GSK’s shingles vaccine which has demonstrated unprecedented benefit being one of the most efficacious vaccines ever developed. Marketing authorization for GSK’s QS-21 containing shingles vaccine is expected towards the end of this year. Given the substantially compressed development time lines in the new world order of IO product development that is immuno-oncology product development, our in-house antibody discovery, optimization, engineering, manufacturing and development capabilities are critically important to rapidly advance our programs. Our first generation immune checkpoint anybodies targeting CTLA4 and PD-1 have benefited from these in-house capabilities already and our de-risk from a regulatory standpoint with a potential rapid path to BLA. Our platform or personalize the antigen vaccines incorporate our clinically validated adjuvant QS-21 and our heat shock protein based delivery system. Our preclinical pipeline features antibodies to two of the most promising targets TIGIT and 41BB. These along with our ability to develop and implement clinical strategies for combinations comprised of agents from our own pipeline provide us with a very strong position for differentiation. In line with our differentiation strategy for both AutoSynVax vaccines as well as cellular therapy we have made significant advances with our proprietary phosphopeptide from the PhosImmune acquisition, which was consummated in December 2015. We have generated data that validate several of these antigenic targets being present in several different human cancers. As mentioned in our press release today, we've also been advancing innovative discovery efforts leveraging our platforms to generate cellular therapeutics. We plan to externally fund the development of our lead candidates that have risen from this effort with a subsidiary company to be majority on by Agenus. Presently, we are in discussions for corporate partnering transactions with the objective of accelerating global development, strengthening our balance sheet and reducing our cash burn. Some of these transactions may include potential structures that would allow us to return North American rights to our portfolio compounds while out licensing ex-North American rights. Overall, we believe Agenus has taken important steps to ensure the rapid development of our pipeline for commercial readiness. These involve activities that are best handled through competent in-house capabilities. They include our in-house antibody discovery and engineering, our in-house manufacturing and cell line development as well as our ability to advance product in the clinic. We have amended our collaboration agreement with Incyte and undergone organizational streamlining of our operations to improve our cash balances, reduce cash burn and extend our cash runway as well as accelerate development. Now I'd like to introduce Dr. Jean-Marie Cuillerot, our Chief Medical Officer who will provide an update on our clinical activities and deliverables. Jean-Marie I didn't mean to make you a Chief Financial Officer, you are the Chief Medical Officer of the company.

Maybe an opportunity for Garo. Thanks Garo and good morning. As Garo mentioned, we are making every effort to sharpen our focus and concentrate on programs with a potential for rapid filing opportunity. One key program is our antibody, 2034. We are pleased to report that this monoclonal antibody last month. We have our first patient and we will wish dose levels that are very likely to be used throughout the program shortly. We refunded those that we will use for clinical activity determination based on safety, PK and occupancy data. This will enable two streams of activity. First, we’ll initiate our expansion cohort in cervical cancer in the second half of the year. Second, we’ll initiate a phase 1b study that will combine anti-CTLA4 and our anti-PD-1 antibodies. Of course these two upstream, we were in parallel and we expect early rate hours of safety and efficacy in the next nine to 12 months of the cervical cancer cohort and for the PD-1 and CTLA4 combination. Now let’s have a look on our anti-CTLA4. Our CTLA4 agonist 1844 is advancing to dose escalation studies with no safety concerns observed today. We present our data at ASCO next month. These two single agents are integral to our near term clinical plants. However, they are just stepping stones for mid-term strategy that is best on combinations that can be placed in two categories. The first category consists of vaccine checkpoint combination and this combination can take the form of the vaccine plus anti-CTLA4 or vaccine plus anti-PD-1 or vaccine with CTLA4 and PD-1. The second category consists of the development of antibody programs that address innovative targets such as 4-1BB and TIGIT. And of course these drugs will be evaluated in the clinic as single agents for in combinations with products of our pipeline. Now a few words on our neoantigen vaccine platform AutoSynVax. As Garo alluded to, AutoSynVax entered phase 1 in April and we have now fully enrolled the study and closed the core. Our first patient has been dosed and the manufacturing of vaccines are [indiscernible] for each of our remaining patients is underway. By the end of 2017 we have two very important pieces of information. First, we have the preliminary results of the human response against patient specific types that constitute the vaccine. But even more importantly we have the safety data with as a monotherapy data, the first step to pursue clinical development of that candidate in combination with our own checkpoint modulator. Indeed, we believe and we have data to support that belief, we believe that patient vaccines in combination with antibody mediated blockade of PD-1 and CTLA4 should provide clear clinical benefits for patients. Next, I would like to highlight that our AutoSynVax candidate will be evaluated in connection with QS-21 our proprietary adjuvant. QS-21 is key component of GSK shingles vaccine information. And Garo mentioned the GSK shingles has been filed for regulatory approval in US, Canada and EU and also most recently in Japan. The final position of the agency is expected for the second part of this year. On the same topic, last week, the WHO announced that the vaccine Mosquirix from GSK, the world’s first malaria vaccine that also contains QS-21 will be made available through select African countries as a prophylactic measure targeted for young children. Overall, this is a testament that our QS-21 adjuvant is an asset that has and will contribute to [indiscernible]. Next, I’d like to take a moment to touch upon the progress we have made from a manufacturing standpoint. 2016 was marked by a significant investment to expand our Agenus West GMP manufacturing facility west GMP manufacturing facility in Berkley to ensure that we can support our clinical development and our [indiscernible] effort in the clinic. As part of this effort, we had GMP production of 1884 at 1000 liter scale. And I’m very happy to share the good news that we have successfully completed a formulation, filling up the work and we’ve also finished activities around the GMP in order to be able to produce commercialized material. This is a significant milestone and the material produced is anticipated to provide sufficient drug supply to support our ongoing SNP4 activities until we initiate pivotal study. We’re also pleased with our progress thus far with discussion with multiple CMOs in preparation for other studies and commercial readiness in the next four years. Before closing, I would like to provide a brief update on the status of our partner assets, most specifically our antagonist, agonist, sorry, 1876 partnered with Incyte. As you know, Incyte is now the sole partner responsible for the development of both [indiscernible] 15% and also developmental milestone payments. In April, Incyte began reporting patient in the Phase 1/2 trial and plans to evaluate the 50 and efficacy of 1876 in combination with either pembrolizumab, nivolumab or both at the combination. Let me now turn to summarize the update on the development activities. First, we are on track for work with BLA for our antagonist. Second, we’re on the clinic with our neurodegenerative platform. These are set altogether with our other checkpoints of the potential to enable differentiated combination and assist company growth beyond the first approval. With that, I turn over to Christine who will review the company financials.

Thank you, Jean-Marie. Cash, cash equivalents and short-term investments were $124 million at March 31, 2017 compared to $76 million at December 31, 2016. For the first quarter ended March 31 2017, Agenus reported a net loss of $17.1 million, or $0.18 per share, compared with a net loss for the first quarter of 2016 of $31 million or $0.37 per share. The decrease in net loss for the three months ended March 31, 2017, compared to the net loss for the same period in 2016, was primarily due to the accelerated milestone payment we received from Incyte. Our operating expenses increased $6.1 million over the same period in 2016 primarily due to the later stage advancement of our programs. I now invite Garo to make any closing statements.

Thank you, Christine. To summarize, we have taken deliberate measures to support the registrational trajectory of the programs at the forefront of our clinical strategy, namely CTLA-4 and PD-1. In addition to our de-risk programs, we're also prioritizing our innovative programs in our preclinical pipeline, including our next generation CTLA-4 molecule, our novel antibodies targeting TIGIT and 4-1BB and our neoantigen vaccine, AutoSynVax. We have revealed that our previously undisclosed programs include cellular therapy candidates, which we plan to advance with a framework of an independent subsidiary within externally sourced funds. Agenus is to hold majority stake in the company. We continue partnership discussions to accelerate development, further add to our cash balance and reduce our cash burn. And lastly, we continue to collaborate with our corporate partners Incyte and Merck to ensure the success of our partnered programs, in which we have a substantial financial stake. With that, I'd like to thank you for joining us on this call today. We hope our update was informative and we look forward to providing additional updates in the future. On that note, I will turn the call back to Michelle.

Thank you, Garo. Operator, you can now open the call for question.

[Operator Instructions] The first question is from Mike King of JMP Securities.

Good morning, guys. Thanks for taking the questions. Just quickly for Christine, on the revenue side, if we back out the one-time payment from Incyte, what were revenues for the quarter? And secondly, is this the only time we should expect any revenues from the prepayment of the royalties from Incyte?

Yeah. So our revenues for the quarter were approximately $7 million taking out the 20 million upfront received or the 20 million in advanced milestones received from Incyte. At this time, that's all -- we're not projecting any future milestone payments in 2017.

[indiscernible] is an additional proceed coming in from the approval of Shingrix expecting when GlaxoSmithKline gets approval, which is anticipated in the second half of this year and that will be in the order of about $15 million. In addition to that, there may be some milestones coming from our other collaboration between now and the year end.

Okay. Other collaborations meaning Incyte or apart from Incyte?

And/or Merck.

And/or Merck. Okay. Great. Thanks for that. Second brief question is, maybe you could talk about how you’re thinking about the combination of 1884 and 2034 as far as how you might dose escalate. Is there any roadmap from the Ipi/Nivo combinations that might help inform how you guys might think about the combination of 1884 and 2034?

Hi. So yes. There is a lot of data out there about the best way to combine anti-PD-1 and anti-CTLA-4. Today, you have data from multiple fronts, not only with Ipi/Nivo that provide information on the safety profile of the pharmacodynamics and on the clinical activity of this combination. So the short response is yes. We have come to a lot of information from what has been published particularly from [indiscernible] most likely the best schedule and dose for the anti-PD-1 condition with the PD-1.

Okay. Thanks for that. And then just finally, Garo, I don't know what you can say about the cell therapy program. Maybe just in vague general terms, can you say anything, is it like CAR T or is it like TCR, is it just as the therapy themselves. What kind of general direction can you steer us and as far as that subsidiary is concerned?

Great. So clearly, we will disclose more data on this as we get closer to launch date for the company or the subsidiary. But our strategy, while we are somewhat behind the other players in terms of clinical development, we clearly have a differentiated strategy. Otherwise, we would not be pursuing it. That differentiated strategy is based on the fact that number one, the current therapies address a relatively narrow market. So our strategies involve going beyond that. Secondly, as you know, the emphasis is on CAR T-cells out there and that is not our emphasis, even though we do have a collaboration -- external collaboration that may result in some products with a CAR T approach, we ourselves are not actively pursuing that. The strategy involves both autologous approaches as well as off the shelf or allogeneic approaches, but because of competition, we're not at liberty to disclose the details of that either at this point. Of course, as we get closer to a launch date, some of these details will be disclosed. Other than that, Jen, would you like to add any other comments?

I think that you've covered that and we're looking very forward to sharing out what our approaches are as well as our differentiate, opportunities that we have with the [indiscernible]

Okay. If I may, the disclosure, would that be when you file an IND, when you are about to present or publish data at a conference or in a journal, peer-reviewed journal, any clues there?

Well, it will be governed by legal disclosure requirements, as we get closer to launching or as we get to the point of launching the subsidiary officially.

The next question is from John Sonnier of William Blair. Please go ahead, sir.

Thanks a lot for taking the question and thanks for really nice update, Garo. This is bigger picture question. You’ve really put together a very diversified collection of assets and I think it’s quite remarkable for a company of your size, you had a fairly meaningful step up in R&D over the fourth quarter and it’s really a question about your thought process in managing this now. I would love to just hear you talk about how you prioritize, where do you spend the incremental next R&D dollar? Thanks.

Thank you very much John. As we indicated at the time of our realignment announcement, clearly, our company is focused in two areas. One, combinations of checkpoint antibody and that includes both combinations with first generation antibodies such as CPLA-4 and PD-1 and we are focused on literally sprinting to the finish line in terms of registration for a combination of CTLA-4 PD-1 in specific indications. Now, we’ve disclosed one indication as Jean-Marie alluded to that cervical cancer, but we have not disclosed our second target indication for competitive reasons. We do have a plan that will be unleashed near term in the form of starting clinical trials and that involves a larger target indication, but a subpopulation of that larger indication with both our agents and other complementary agents. So that's one area of focus. The second area of focus for us is clearly develop our novel antibodies, take them into the clinic and develop them in combination with the first generation checkpoints, meaning CTLA-4 and/or PD-1. And thirdly, as you heard from Jean-Marie, we initiated our AutoSynVax trial just recently and enrollment in that trial is closed. So we have enrolled patients at record time and we're very eager to start combinations of AutoSynVax along with our checkpoint antibodies, which we believe as I alluded to earlier, are key to expanding the current immunooncology market that is just responsive to checkpoint antibodies and go beyond that. So that is our focus. And we are clear on what we need to get done and as you can tell from the progress that we've made over the last two years, you cannot deliver on what we have without being focused on those issues. With regard to cell therapy, now, this is a research effort that got initiated close to two years ago and less than that 18 months actually and there have been some very important developments there in terms of getting our first candidate product that has been identified into the clinic. However, because of what you said, because of the fact that we need to remain focused in order to deliver on our key priority programs, we have decided that this effort deserves its own infrastructure, its own capabilities and its own separate financing to take it forward. And hence our decision to set it up as a separate subsidiary and fund it accordingly.

The next question is from Ramakanth Swayampakula of H.C. Wainwright. Please go ahead.

Thank you. Good morning. A couple of quick questions. In the press release, you reported that TIGIT has been reverted back to Agenus from Incyte. I'm just trying to understand what are your plans with this molecule and who made Incyte decide not to pursue on their dollar, but give it back to you.

First let me correct an erroneous statement that you have made in that Incyte decided not to pursue it. This was part of a negotiation between us and Incyte and I would not at all suggest that Incyte did not want to pursue this molecule. It was terms of the negotiation that allowed us to basically get it back. This is our discovery. It is a very important molecule, a very important target and we have the capabilities to develop it either as a single agent or and/or in combination with some of the first generation antibodies that we have. So that's one clarification. Secondly in terms of what we plan on doing it, we are literally sprinting with this molecule to take it into the clinic and once we take it into the clinic, we will disclose more specific plans in terms of how we plan on developing it.

Thanks for the clarification as well. On the AutoSynVax program, I'm just trying to understand, we’re going to see some data by the year and. Is that a place for AutoSynVax to be developed as a monotherapy or you are basically going to be thinking of it as a combination program from here onwards?

Jean-Marie.

Thanks for your question. There are plenty of data supporting that the activity or vaccine is largely amplified when they’re combined with checkpoints. The first data pretty much 10 years old and whatever the platform that is used can be vaccines or peptide [indiscernible] these drugs have to be combined with checkpoint to deliver the most activity. Here, the question will become how to manage the administration of vaccine in diseases that where checkpoints are already used as a standard of care, but we are going to evaluate that.

[Operator Instructions] This concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Armen for any closing remarks.

Thank you very much everybody and thank you for the very insightful questions. Of course, we are always ready to address more questions individually and we look forward to interacting with you going forward of course. And I believe Michelle, we have –

Yeah. We just want to remind listeners that the call will be accessible from the company's website at www.agenusbio.com. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your telephones. Thank you.