Agenus Inc. (AGEN) Q3 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Agenus Third Quarter Financial Results Conference Call. As a reminder, today's conference 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. Welcome to the Agenus third quarter financial results conference call. Before we provide an update, I would like to first remind you that this call will include forward-looking statements, including statements regarding our clinical development plans and timelines, our partnership opportunities and timelines, and our financial position. These statements are subject to risks and uncertainties and we refer you to our SEC filings for more details on these risks. As a remainder, this call is being recorded for audio broadcast. Joining me today are Dr. Garo Armen, Chairman and Chief Executive Officer; Dr. Anna Wijatyk, Head of Clinical Development; Dr. Sunil Gupta, Head of Regulatory and Pharmacovigilance; and Christine Klaskin, our Vice President of Finance. During this call, Garo will provide a corporate update, Anna will summarize our clinical progress and paths to BLA, 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, everybody. I will update you firstly on our substantial operational achievements, which are unprecedented certainly for a company of our size, but also for the field of immuno-oncology. Second, I will provide the latest update on the status of our partnership discussions. And third, I will discuss our financial status and our creative financing strategies that have allowed us to advance our programs, while maintaining or growing our cash balances. Recently at ESMO, we reported that of the 130 patients treated with our CTLA-4 and PD-1 antibodies. More than 60% have shown clinical benefits. These include durable responses across multiple solid tumors, including cervical cancer, which is the subject of our first registration strategy as you will hear from Dr. Anna Wijatyk, our VP of Clinical Development who will cover our discussions with the FDA last week, which have confirmed our path to a planned BLA filing in 2020. Our discover and innovation engine, which has given birth to our lead clinical stage antibodies CTLA-4 and PD-1 will have produced 12 IND filings by the close of this year. This is an industry record. Our innovative portfolio includes first-in-class and best-in-class assets. Today, eight of these programs are in the clinic and also advancing in combination trials. Next, I will address the status of our partnering activities. I will provide an update on this with as much transparency as possible, while continuing to respect the sensitivity of these discussions. Clearly, we had hoped that we would close on one of these transactions as early as eight weeks following our last earnings call. However, things have taken a bit longer, simply because of process [ph]. Despite these delays, two of the prospects are now rapidly advancing towards closure. As mentioned in prior calls, we have sought and identified partners who are best fit to maximize value to Agenus, to them, and to our respective shareholders. This includes companies with an understanding of the critical importance of our diverse pipeline that we have built to optimize the possibilities of achieving significant success with clinical trials, as well as commercial activities. It is important to note that we have also made substantial progress with our existing partnerships. We have met or exceeded all research, IND filing, and commercialization milestones in our partnerships with Incyte, Merck and GSK. We triggered 14 million in cash milestones from Incyte and Merck this year for the initiation of Phase 1 trials for LAG-3, TIM-3, and an undisclosed antibody candidate by Merck, all of which were discovered by Agenus. While we are progressing our programs and filing INDs at record pace, as well as progressing our partnership discussions to a closure. We are also prudently satisfying our near-term cash needs. We close this quarter with over 46 million in cash. If you remember, at our last earnings call, we had projected that we would be at or above last quarter's cash levels, which was at 43 million. So, we have achieved that. We continue to manage our cash positions prudently with an intent to minimize dilution to shareholders to bridge to a partnership transaction. As an example of this and subsequent to the end of the third quarter, we announced the completion of a private financing of 40 million, with a single investor netting the company approximately 39.9 million in additional cash. This will be reflected in our year-end numbers. Since our last call, we also announced a royalty transaction with XOMA, which involved the purchase of a minority interest in the royalties and milestones that we are eligible to receive from Incyte and Merck. We received 15 million at closing and retained the majority that is 67% of all future royalties, and 90% of all milestones from these products. Importantly, we remain eligible to receive up to an additional 445 million and 85.5 million in potential development regulatory and commercial milestones from Incyte and Merck. So, overall, so far this year, our financial position was enhanced with 97 million in cash milestones from our existing partnerships and strategically executed financial transaction. Finally, as you may know, our QS-21 Stimulon adjuvant is a critical component of GSK's Shingrix vaccine. Shingrix sales are now running substantially ahead of earlier forecast, making additional milestones from our royalty transaction from HealthCare Royalty much more likely. Agenus is positioned to file a BLA, as early as 2020 to become our commercial company so that we can continue to drive innovation with speed. These are critically important drivers of success in order to deliver the next major breakthroughs in immuno-oncology. Our portfolio of first-in-class and best-in-class assets, including our next generations CTLA-4 and by bispecific antibodies will be in the clinic in 2019. These we believe will define the next major breakthroughs in the field of immuno-oncology. A field, which has been relatively dormant with the absence of new agents to drive the next set off advances. Before I turn the call over to Dr. Anna Wijatyk, I will provide a summary of our important operational achievements. We set out to file six INDs early this year and we are on track having four already filed and two slated to be filed by year-end. These include LAG-3 and TIM-3 antibodies under our partnership agreement with Incyte. Today, I’m pleased to announce that we have filed an IND for our next-generation CTLA-4 antibody. We have briefly described our next-generation CTLA-4 AGEN1181 in our last earnings call. This molecule, we believe, will have both potential efficacy and safety advantages relative to competitive molecules, including one enhanced potency through increased potential for T-cell priming while we also achieved T-reg depletion. This is a very challenging and unique attribute that we have been able to achieve with this molecule. Two, broader benefit to a wider patient population including the approximately 40% of patients who are unlikely to respond to first generation CTLA-4 therapies, due to a genetic pre-disposition. And third, improved safety through FC engineering to avoid common side effects of first generation CTLA-4 antibody, an enhanced therapeutic potential to enable broader range of dosing options. All of which, have been achieved with 1181, based on the data that we have generated in preclinical models so far. As I said earlier, additionally we are on track to file INDs for two of our first-in-class bispecific antibodies this year. These antibodies were also described in our last earnings call. And as I had mentioned, importantly these two tumor microenvironment conditioning agents that is the bispecific’s that I'm talking about offer critical solutions to overcoming the limitations of current I-O treatments. You will hear more specifics on these compounds as they enter the clinic next year. Today, we are positioned to deliver meaningful, clinical advances with the innovation and speed. Our discovery platforms have enabled our four therapeutic classes, including checkpoint antibodies, cellular therapies, neoantigen vaccines, and adjuvants. Our cell line development and manufacturing platforms enable a fast path to IND, and as it has been our track record so far. I want to reiterate that these capabilities have contributed to our record-breaking timelines to deliver clinical grade materials from research cell bank two, three times faster than industry average, and also very importantly registration grade material at commercial scale from technology transfer to our commercial CMO, as much as five times faster than industry standards. We have demonstrated speed in our CTLA-4 and PD-1 programs by enabling the CMC readiness to support a potential BLA filing, as early as I said earlier, 2020. Just four years after our first-in-men monotherapy trial commenced. As we secure our BLA filing, our clinical development and regulatory teams are led by industry standard, not only that, but also innovators that are energized – who are energized by our pipeline and capability. Dr. Sunil Gupta, who you met during our last earnings call, and now Dr. Anna Wijatyk who will be speaking next. Anna joined Agenus following her tenure as Vice President of Oncology and Global Development Lead in hematological cancers at Shire. She has also held leadership positions at Bristol-Myers Squibb Baxter. Dr. Wijatyk is an expert in delivering programs under accelerated timelines for regulatory approval. Anna will now provide an update on the status of our lead programs and our recent interactions with the FDA, which have confirmed our clinical path forward for as I said, again, for a potential BLA filing submission in 2020.

Thank you, Garo. I am excited to be part of the Agenus team advancing such an innovative portfolio and delighted to give an update on the progress of our lead CTLA-4 and PD-1 program. As Garo mentioned, we have treated over 130-patients with our CTLA-4 and PD-1 antibodies separately and in combination. We have published widely on the pharmacokinetics and pharmacodynamic profile of our agents. We have also demonstrated that our agents are clinically active. Just a few weeks ago, we provided the latest clinical update at ESMO. As monotherapy, our PD-1 agent AGEN2034 showed the clinical benefit of 68% in evaluable patients with metastatic or locally advanced solid tumors. This data, also includes consumer responses in three out of seven evaluable patients with refractory cervical cancer. Agenus has long understood the criticality of anti-CTLA-4. Today, there is growing evidence that the addition of CTLA-4 to PD-1 therapy improves response rate and durability of responses in several solid tumor cancers. Agenus is unique in being one of the few companies with both anti-CTLA-4 and anti-PD-1 antibodies in its own portfolio, along with robust data showing their activity. Ours is the most advanced clinical stage combination with registrational potential in patient with second-line cervical cancer. We endeavored the expanded response rate and durability of responses beyond anti-PD-1 alone in this setting. Our combination trial has completed dose escalation. We have initiated the expansion phase in patients with cervical cancer. Our global environment is actively underway. We presented an early glimpse of our combination data at ESMO and reported disease control in 44% of patients. In a data update since ESMO, we have shown improved disease control. In fact, in patients with refractory solid tumors we see a clinical benefit in over 63% of patients with ovarian, breast, and soft tissue sarcoma. Our clinical results also include an objective durable response in a patient with ovarian cancer. I want to emphasize that the follow-up period for this study has been shorter than for our PD-1 monotherapy trial and therefore we expect this data to mature further with additional follow-up. The particularly pronounced clinical benefit we have seen in the gynecology cancers has generated the interest of the gynecology oncology group, GOG. This categorized our recent engagement with the GOG with whom we are now collaborating to drive accruals in our current and future Agenus sponsored CTLA-4 and PD-1 trials. This is a group that has a terrific record, including the approval of topotecan Avastin for patients with cervical cancer. During our last call, my colleague Dr. Gupta explained that the FDA oncology division has been progressive and has acted to promptly approve products that provide substantial clinical benefit with relatively small trials. CTLA-4 and PD-1 antibodies have been such program with accelerated approvals granted for this product in less than four years after first-in-human study. We recently met with FDA to review our data and discussed our plans to BLA. Through our collaborative discussion, we confirmed that we are positioned to take advantage of accelerated pathways for our approvals with relatively small numbers of patients and surrogate or short-term endpoints in our trials. We anticipate filing for accelerated approval, as early as 2020. In summary, our CTLA-4 and PD-1 programs are advancing in three active clinical trials designed to take advantage of accelerated pathways for rapid approval. These trials include PD-1 monotherapy in patients with refractory cervical cancer CTLA-4 plus PD-1 combinations that we anticipate to further expand response rate and durability of response in the same cervical cancer setting. And CTLA-4 monotherapy in patients who are refractory to PD-1 representing a significant clinical need. I am delighted to be associated with the company with such an expensive pipeline of products in the clinic and soon to be in the clinic. I will now turn the call once again to Garo.

Thank you, Anna. There are 13,000 new cases of cervical cancer annually and 4,000 deaths in the U.S. alone. Our initiatives to advance programs in second line cervical cancer exemplify our commitment to provide access to effective agents were current treatment options have significant limitations. At the same time, these efforts represent important commercial opportunities for us. This year alone, aggregate commercial revenues for antibodies targeting PD-1 and CTLA-4 is expected to reach $15 billion in annual revenues. We have defined several development pathways, including, as I said, second line cervical cancer where we can make a meaningful difference to patients, while also capturing a portion of this very large market. Next Christine Klaskin, our VP of Finance will provide some financial highlights. Christine?

Thank you, Garo. As Garo mentioned earlier, we closed this quarter with a cash balance of $46 million. At the end of 2017, our cash balance was 60 million and at the end of the second quarter our balance was 43 million. As you can see from these numbers, we continue to manage our cash prudently ending this quarter as we projected with a cash balance above that of the end of the second quarter. For the third quarter ended September 30, 2018, we reported a net loss of $34 million or $0.29 per share, compared to a net loss for the same period in 2017 of $37 million or $0.37 per share. In the third quarter, we recognized revenue of $13 million, which includes a milestone achievement and non-cash royalties earned. For the nine months ended September 30, 2018, we reported a net loss of 113 million or $1.04 per share, compared to a net loss for the same period in 2017 of $86 million or $0.88 per share. The increased net loss reflects reduced revenue during 2018, due to accelerated milestones received during 2017 from Incyte and the 2018 loss on early extinguishment of our debt. I will now turn the call back to Garo for his closing remarks.

Thank you, Christine. In closing, our key milestones over the next 12-months include one to complete accrual of our CTLA-4 and PD-1 trials. These results are expected to support our path to BLA submission and enable us to commercially launch our CTLA-4 and PD-1 antibodies within the prescribed timeline for I-O antibodies of four years from first-in-men to registrations. Two, advanced new discoveries to patients, including our two first-in-class bispecific antibodies, and our next generation CTLA-4. Three, initiate combination trials of our neoantigen vaccine with our CTLA-4 and PD-1 antibody. Four, close at least one of our ongoing partnership discussions. Five, with AgenTus, we expect to complete a private placement, as well as partnership transactions. We’re also advancing our lead AgenTus cell therapy program into the clinic and are on-track to file an IND within the next 12 months. We continue to expand our communication effort as we talked about this briefly last time to a significantly visibility at major oncology conferences, high-profile publications, and through the publication of our newsletter, which I hope you are all enjoying. The newsletter as you know is published every other Monday and summarizes key advances in our progress and highlights details related to our differentiated capabilities. Along with this, we have also increased our presence in social media. We have bolstered our communications efforts to showcase our rare and diverse pipeline with four different therapeutic classes. The perception of investors seeing us as a vaccine-only company is changing. However, those of you who have followed us will know that Agenus transformed in the last four years to become a diverse immune-oncology company with very unique attributes. We take responsibility for educating investors and others going forward, and we anticipate that our enhanced efforts of our performance and our performance of course will provide an impetus to understand our company better and generate a greater following by serious investors. Thank you very much. And I think we are ready for questions

[Operator Instructions] The first question is from the line of Matt Phipps with William Blair. Please go ahead.

Thanks for taking my question. Nice update today. Just two questions from me. First, have you identified any potential applications beyond second-line cervical cancer that may allow this rapid development path for the PD-1 CTLA-4 combination? And then secondly, how do you see advancing these two separate CTLA-4 assets over time? Obviously, it's an interesting preclinical publication on the FC gamma receptors 3A that you recently published, but is there a point at which you would, you know if AGEN1181 looks good that you would almost, kind of, stop development of AGEN1884 in lieu of further progressing AGEN1181?

Okay. I will just briefly comment on the last part of your question and then pass it on to Jen to address the rest. So, the question of will we stop developing CTLA-4, the first-generation CTLA-4? It is probably unlikely that we will do that because the first-generation CTLA-4 has proven the utility in a number of indications and it is growing particularly in combinations. However, as Jen will address, sliding our 1181 in trials and in indications where patients may not be responding to the first-generation CTLA-4 is a perfectly closable strategy, but Jen why don't you go through Matt’s questions.

Sure. Hi, Matt. Thanks for your questions. Both very important. To answer your first. We have actually observed clinical benefit across a number of different solid tumors as we publicly presented. And with the data that we are seeing so far, we are exploring developing our lead antibodies and other indications. However, we have not yet disclosed those indications of course for competitive purposes, but we have engaged key opinion leaders and we are continuing to interrogate those tumors in which we see more robust clinical signals of activity. So, you’ll be hearing more about our expanded development plans beyond cervical cancer in the future. With respect to our next-generation CTLA-4 and just to remind you that this was a discovery that we made here at Agenus and one that you noticed was published earlier this year in cancer cell. It is a highly sophisticated mechanism in which we have applied this engineering during next-generation CTLA-4 that allows us what we see is in addition to T-reg depleting we also see very significant enhanced T-cell priming. We see an opportunity to develop this antibody both independently because of its potential improved potency, there are some independent development paths that are quite rapid that we plan to pursue, as well as some redundant indications were CTLA-4 now is active and we believe the next generation CTLA-4 may be more active. So, we have the opportunity, our clinical trials will be starting in the impending weakness, and we will through dose escalation and expansion will have the opportunity to evaluate our next gen in both cases, both new applications for the agents where we think we can have robust rapid readouts, as well as some of the redundant areas where first-gen CTLA-4 is already approved and the next-gen may have enhanced response rates.

Thank you, Jen.

Mr. Phipps, are you done with your questions?

I can ask another one if you’d like.

It’s up to you sir.

Sure, I’ll ask one more. I appreciate the financial responsibility here, getting some milestone payments and able to kind of send your cash run rate, but I guess, how do you balance advancing all of these additional clinics into the pipeline versus ensuring you have the capital to, I guess, at least get across the finish line with the initial PD-1, CTLA-4 combo in cervical? And I guess, how do you just kind of balance these two things, especially with some of the more ancillary things that seem to be kind of still hanging around like the AutoSynVax and AgenTus, which I'm not sure how capital-intensive those are at this point?

Matt, that’s an excellent question, and I go to sleep every day and wake up every morning thinking about these issues, of course. And the way we balance it, is with prudence. As I mentioned earlier, we are increasingly entering a period where innovation and speed will drive future success. There is no ambiguity about it. Obsolescence rates will increase. So, without innovation and speed, you may be stuck with yesterday's products. Now, we have the blessing of having not just a fantastically diverse pipeline, but also very importantly the ability to continue to innovate and I think that is absolutely critical. And so, to your point, we balanced these options prioritizing programs that are mission-critical for us, until as I said earlier, a transaction that will alleviate our cash needs near-term. And that transaction is expected to be completed very soon.

I guess just a quick follow-up on that. I don't really, I know you don't really have guidance, but you’ve managed to keep R&D expenses pretty flat year-over-year from last year so far this year. With more things entering clinics next year, how much of an uptick you want to expect on the R&D burn?

Sure. When we enter into the kind of partnership that we’re anticipating, some of the costs will be deferred to the partner, not all, but some of the cost will be deferred to the partner. And you can expect a modest uptick in our spending because of all of what you are articulating, but it will not be a substantial uptick in spending.

Thanks Garo.

The next question is from the line of Frank Simmons with Majestic. Please go ahead.

Good morning, thank you for taking my call. I have a few questions, first, is it safe to say that one of the reasons for the delay in delivering these partnerships is because Agenus leadership is renegotiating terms with these potential partners?

It is not safe to say that. As I said in my earlier comments, it is process-related, and I can tell you that we are beyond negotiating financial terms with at least two of the prospects that we expect to come to closure soon.

Okay. And you still expect at least one of those by the end of the year?

Yes.

Okay. And it will be your 2018, just to make sure?

Yes.

Okay, thank you. And then the other question I have is for you Garo, I know you are getting close to the retirement age, what is your intentions on staying with Agenus and leading the company in the near-term?

I have no intentions of retiring.

Alright. Thank you. I appreciate that. That’s all I have.

Thank you.

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

Thank you very much for your participation and attendance. We always enjoy speaking to you and updating you, and I think going forward also, your questions are very informative for us to think about how to articulate, particularly with our communication strategies. And as I said earlier, we are, for sure, upgrading our efforts to communicate on a more regular basis and you will see the results of that in coming weeks and months. So, thanks once more, and I believe there will be a recorded version of this transmission.

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