Agenus Inc. (AGEN) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Agenus First Quarter Financial Results Conference Call. As a reminder, today's conference call is being recorded. Now, I would like to turn the conference over to Dr. Jennifer Buell, Head of External Affairs and Communications at Agenus. Please go ahead, Dr. Buell.

Thank you, and welcome to the Agenus first quarter financial results conference call. Before I continue, I'd like to remind you that this conference call will contain forward-looking statements, including without limitation, statements regarding the company's development and commercialization plan and timelines. These forward-looking statements are subject to risks and uncertainties disclose in more detail in our most recent filings with the U.S. Securities and Exchange Commission. And that could cause actual result to differ materially. These statements speak only as of the date of this call and Agenus undertakes no obligation to update or revise these statements, except to the extent required by law. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. When evaluating Agenus' business and securities, investors should give careful considerations to these risks and uncertainties. As a remainder this call is being recorded for audio broadcast. Joining me today are Dr. Garo Armen, Chairman and Chief Executive Officer; and Christine Klaskin, our Vice President of Finance. During this call, Garo will provide a corporate update and Christine will provide a financial review. We will then open the call for questions. With that, let me turn the call over to Garo.

Good morning and thank you for joining us for our quarterly update. As you will see in the next few minutes, we have had a very productive several years, including the substantial progress we made in the past several months. These have been in our clinical programs, as well as the substantial number of new discoveries which are about to enter the clinic. I will speak about these in more detail, but in summary we have made a conscious decision several years ago to pursue two antibodies, which have become the backbone of immuno-oncology cancer treatment today. These are antibodies that target PD-1 and CTLA-4. We have advanced them into the clinic individually and in combinations. So far we have treated 100 patients and observed a number of responses, which will be presented at ASCO this year. We believe these backbone molecules are critically important and we plan on pursuing combinations of them, including with one another to achieve regulatory approvals. But we also believe they will play an important role in combinations with our portfolio of novel antibodies, neoantigen vaccines, and cell therapies. How we have accomplished what we have thus far, innovation and speed are the basis of our immuno-oncology business model with five INDs filed over the past 18 months, six INDs on track to be filed this year, and two additional INDs planned in the first half of next year. Our IND roster for this year includes bispecific antibodies that modify the tumor microenvironment in order to make the tumor more susceptible to immune attack. Tumor microenvironment modifiers are amongst the most desirable next gen immuno-oncology approaches. We have at least two antibodies with uniquely desirable properties. In addition to the INDs I mentioned, we expect our cell therapy company AgenTus to also file its first IND for cell therapy next year. Next, I will provide a partnership update, while I don't have an announceable development just yet, discussions are advancing with various companies. These discussions range from several product licensing deals to potentially much larger collaborations. Our expectations are to bring them to closure within the next two to three months. With respect to progress with existing partnership programs with Incyte and Merck all are advancing and we expect additional milestone payments including some that will be payable this year. Also our QS-21 stimulant has received increasing interest as the most potent adjuvant available to date. QS-21 is also an enabling component of our neo-antigen cancer vaccine program, which will be entering the clinic in combination with our own checkpoint antibodies very soon. As you're aware, QS-21 is a key component in the world's most efficacious shingles vaccine called Shingrix, with over 97% efficacy. Shingrix received approval at the end of last year, and this year's revenue estimates have recently been revised to three times what they were earlier in the year. GSK's first full year revenues of Shingrix is expected to top $600 million this year, which is about the same as Merck's Zostavax it was tracking last year about the same after 15 years in the market. Our royalty transaction announced earlier this year has additional revenue milestone payments totaling $40 million, which are due to Agenus if specific revenue milestones are achieved. Now I will provide you with an update on our clinical and research programs. Last year, we launched combination clinical trials of our proprietary CTLA-4 targeting antibody AGEN-1884 with our own PD-1 targeting antibody AGEN-2034. To- date, we have treated as I said more than 100 patients with our CTLA-4 and PD-1 antibodies separately and in combinations. We presented compelling data under pharmacodynamic activity of our anti-CTLA-4 and anti-PD-1 antibodies at AACR recently. As I mentioned earlier, at ASCO this year, there will be clinical data presented on both of these antibodies. In our trials with both compounds, we have seen partial and complete responses as I mentioned in patient with advanced cancers. We plan to develop, register, and launch our CTLA-4 and PD-1 antibodies. This year, aggregate revenue for antibodies targeting CTLA-4 and PD-1 are expected to be $15 billion. Hence we believe that despite the current players, our antibodies represent a significant commercial opportunity for Agenus. Very recently, we shifted our strategy of first approval to cervical cancer from non-small cell lung cancer. We will be developing the combination of our own two antibodies for cervical cancer. The reasons for our strategy shift include increasingly crowded lung cancer opportunities and Merck’s recent data with Keytruda in combination with chemotherapy in first-line non-small cell lung cancer, which has set the bar higher for any future approvals. PD-1 has also emerged as an important driver of our -- of improved efficacy when used in combination with standard of care, chemo or radiation. We are opportunistically exploring such combinations with our own PD-1 and CTLA-4 antibodies. We continue our commercial launch readiness efforts, we have supplied our clinical programs and have successfully manufactured commercial grade CTLA-4 and PD-1 antibodies. We acquired our California manufacturing facility three years ago and it has proved to provide us with independent, speedy and cost efficient manufacturing capabilities today. Also, lastly before I get into our pipeline, this year we're planning triple combination studies of our proprietary vaccine in combination with both our CLTA-4 and PD-1 antibodies. So far, I have discussed our antibodies which are in the clinic, and touched on our future clinical and product registration plans. I will now shift to our pipeline of a slate of exciting immuno-oncology agents expected to enter the clinic soon. Our novel pipeline is advancing as I mentioned earlier, and we are on track to file six INDs this year and an additional two INDs -- or additional two INDs in the first half of next year. Amongst that, is our next gen CTLA-4, our scientist have discovered a novel mechanism that enhances the function of the today CTLA-4 molecules. These findings are expected to be published shortly. With this feature, our next gen CTLA-4 is designed to deplete T rigs and importantly improve T-cell timing. We and increasing numbers of others expert in the field believe that this beating T rigs is critical to overcoming the limitations of current immuno-oncology treatments and successfully depleting T rigs could expand the market for current treatment significantly. We're also planning IND filings for our bispecific agents this year. These Agenus' bispecific antibodies are design to selectively deplete this time the intratumoral regulatory T-cells as well as condition the tumor micro environment further. We believe these compounds address tumor escape mechanisms in solid tumors as well as mythological tumors like B-cell lymphoma. Lastly, as you all know cell therapy has shown life-saving potential for patients and has created significant value for shareholders. In spite of this current approaches have limitations that are well known including manufacturing and logistical challenges and very high costs of production. We believe AgenTus our cell therapy company has the technologies and capabilities to potentially address these limitations. Last week Dr. Hurwitz presented at PEGS Summit in Boston. Specifically our proprietary platform has generated high quality T-cell receptors, libraries of those receptors designed to target solid tumors. In addition, our allogeneic cell format is designed to address manufacturing and logistical challenges, scalability as well as costs. We also have a very exciting targeting mechanism for both vaccines and cell therapy. It is our proprietary library of phosphorylated targets designed to optimize efficacy with improved safety, potentially with an off the shelf targeting mechanism as well. One of the most compelling advantages for our cell therapy business includes access to de-novo discovery platforms, core capabilities in bio-informatics, structural and computational biology, molecular and cell biology and very importantly a pipeline of validated check point antibodies and bispecific tumor micro environment conditioning agents to rapidly develop first-in-class combinations. These are capabilities all of which we possess in-house, which gives us the ability to innovate and advance programs rapidly. In summary, given our long history in the field of cancer immunotherapy and the key acquisitions we’ve made in the past four years, along with our extraordinarily talented team. We have transformed Agenus into a company with one of the most exciting and extensive pipelines in the field. Also importantly, our capabilities which have generated our exciting pipeline are now advancing next generation opportunities beyond those stated to enter the clinic in the next 12 to 14 months. As I alluded to earlier, also we believe and other experts believe that new mechanisms such as the ability to modify the tumor micro-environment will be the next generation drivers of successful treatment and cures for cancer. We believe we have amongst the best products to accomplish this. In addition our ability to combine these molecules with first generation immuno-oncology antibodies, our new antigen vaccines, our cell therapies and adjuvant provide us unique advantages in the immuno-oncology field, which are very rare. Increasing knowledge of these capabilities and our pipeline have been the key drivers of partnership interest from companies, with which we are in discussions to-date. Thank you very much for your time and interest in our company. We look forward to your questions at the conclusions of our discussion. Christine?

Thank you, Garo. Cash and cash equivalents balance was $52.3 million at March 31, 2018 this compares to a balance of $60.2 million at December 31, 2017. For the first quarter of 2018, we reported research and development expenses of $29.4 million as compared to $32.6 million for the same period in 2017. Our net loss for the three months ended March 31, 2018, was $54.3 million or $0.53 per share, compared to a net loss of $17.1 million or $0.18 per share for the first three months of 2017. This increase in our net loss in the first three months of this year was due to several one-time items as well as non-cash charges. These items in aggregate affected this year’s quarter unfavorably and prior year’s quarter favorably. In the first quarter of this year, we recorded a loss on the extinguishment of our debt and had increased non-cash charges. Whereas during last year’s first quarter, we recorded a large accelerated milestone payment we received from Incyte. Notwithstanding these items, our total R&D and G&A expenses were lower for the first quarter of this year compared to the first quarter of 2017. I will now turn the call back to Garo.

Thank you, Christine. I’d like to turn it back to our operator Rockwell to begin questions.

[Operator Instructions]. And ladies and gentlemen at this time we have Matt Phipps from William Blair. Please go ahead.

Hi, thanks for taking my question. Garo you’d previously said that I think the timeline for a potential BLA in second line cervical was 2020. Is there any way to accelerate that now that it has become your primary focus?

It’s possible, I think it would be perhaps over reaching it to accelerate it earlier than 2020. But, it’s possible, because we are looking at a number of opportunities in patients who are refractory to current treatments, including IO treatments that could potentially give us readouts very rapidly. And we also believe that particularly in those patient populations, the availability will be much greater than in highly competitive areas such as first-line, non-small-cell lung cancer hence shifting our strategy as you alluded to Matt.

Great, thanks. And then could you also just update us on kind of where the current cash you think gets you as far as runway? There is a number of discussions ongoing to hopefully extend that, but just as it stands now.

So let me point out to everyone that so far we have managed our cash versus spending pretty well. I mean given the level of activity that’s going on in the company, and the progress that we have made on a number of fronts with almost unprecedented number of IND filings planned for this year and for the first half of next year, our cash position because of our creative structures that we have come up with has dropped only from $60 million three months ago or at the end of last year to $52 million and change. So that takes obviously the ability to manage cash properly. Now having said that, as you alluded to Matt, there is no question we will need cash going forward. And if I look at our prospects for cash, they certainly include partnership prospects, and because we have a number of active discussions, not just one, our probabilities of success to bring one of these deals to closure is higher than it would have been if it was just one or two companies. So that’s one issue. And the second one is we are looking at a number of geographic opportunities for Agenus and AgenTus that could bring in cash in addition to what we are talking about or in place of what we are talking about. And we’re also talking to potential synergistic private investors in the company. So all of these prospects that are being pursued in parallel and our very last resort would be an equity offering.

Thanks. And I guess one last thing for me. When do you believe you will be able to disclose the bispecifics that you have planned into the clinics, it will be at IND filing, at first patient dosing, somewhere in that timeframe?

Yes, I will ask Jen to answer that question because she is intimately familiar with the timelines in these programs. Jen go ahead.

Thanks, Garo. Hi, Matt. I will share with you that we had hoped and could take advantage of the opportunity to disclose these targets. However, these antibodies, particularly the bispecific antibodies are of great interest and are undergoing some of these partnering discussions. So for the sake of protecting the IP around these assets both for our own purposes as well as those for potential partners, we're not disclosing them at this time.

And also Matt, it's not just IP, but also knowhow of targets and structures of these antibodies that we would like to keep, I hate to say this in the new world of blockchain transparency, but it is best to keep it secret at this point.

Okay, thanks for taking the questions.

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

Thank you very much everybody for your attentiveness. We have covered quite a bit in our session today. And if you have any questions beyond those that were asked during the session please do not hesitate to contact Jen and our team. We're always available for you. Thank you.

And thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.