Jonae Barnes - VP, Investor Relations & Corporate Communications
Garo Armen - Chairman & CEO
Christine Klaskin - VP, Finance and Principle Financial Officer
Joe Pantginis - Roth Capital Partners
Megan Dow - MLV & Company
Agenus Inc. (AGEN) Q4 2012 Earnings Call February 28, 2013 11:00 AM ET
Good morning. My name is Candice and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter and year-end 2012 earnings conference call. All lines have been placed on-mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.
Ms. Jonae Barnes, you may begin your conference.
Thank you, Candice and good morning everyone. Welcome to Agenus’ conference call to discuss the financial results for the fourth quarter and year-ended 2012. With me today is, Dr. Garo Armen, Chairman and CEO, and Christine Klaskin, Vice President of Finance. During this call, we will review our financial results as well as provide a corporate update. We will then open up the call to a Q&A session.
But before we continue, I would like to remind you that this conference call will contain forward-looking statements including statements regarding the company’s cash position, potential income streams, development and commercialization efforts, timelines, availability of data and potential efficacy and market potential with respect to products and product candidates of the company and its partners. 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 the 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 remainder, this call is being recorded for audio replay.
With that, I will now hand over the call to Christine to review our financial results for the fourth quarter and year-ended 2012.
Thank you, Jonae. Good morning everyone and thank you for joining us on today’s call. Some of the statements I'll be making now are also contained in the press release issued this morning. For the fourth quarter, we reported a net loss attributable to common stockholders of $5.6 million or $0.23 per share. This compares to a net loss attributable to common stockholders in the fourth quarter of 2011 of $6.2 million or $0.29 per share. For the year ended December 31, 2012, we incurred a net loss attributable to common stock holders of $12.1 million or $0.51 per share. This compares to a net loss attributable to common stock holders of $24.1 million or $1.21 per share for the comparable period in 2011.
The decrease in net loss for the 12 months ended December 31, 2012, compared to same period in 2011 is directly related to the revenue of $13.4 million generated during the first quarter of 2012, which is primarily due to the one-time payments received to an extended agreement with GlaxoSmithKline enduring license of non-core technology.
Cash provided by operating activities for the year ended December 31, 2012, was $1 million compared to cash used in operating activities of $16.2 million for the same period in 2011. Cash and cash equivalents were $21.5 million as of December 31, 2012. Based on our estimated net cash burn for 2013, which is defined as cash used in operating activities plus capital expenditures, we expect sufficient financial resources to fund operations in to 2014.
This concludes the financial portion of the call. Garo will now provide a corporate update.
Thank you, Jonae and Christine. I am pleased to report that last year all of our high priority programs continued to advance. Between us and our corporate partner GSK, we achieved several milestones including the following:
Positive clinical results were achieved from the second Phase 3 trial of GSK’s RTS,S malaria vaccine candidate. This vaccine, also called Mosquirix contains our QS-21 Stimulon adjuvant. The results of the clinical trial were published in The New England Journal of Medicine. Both co-primary endpoints in large ongoing efficacy trials were met. We anticipate this product could be launched in the 2015 timeframe.
In November of last year, we began a Phase 2 randomized double-blind multi-center study of HerpV. Our recombinant vaccine candidate to treat genital; HerpV is formulated with our QS-21 Stimulon adjuvant. I am pleased to report that enrolment of this study is now complete. The study will determine the efficacy of HerpV as measured by viral shedding before and after vaccination.
Data from the Phase 1 trial of Prophage series G-200 in glioma patients whose disease has recurred were published in Clinical Cancer Research. This data showed that a tumour specific immune response can be generated after treatment with Prophage. This observation appears to provide evidence that potential specific immune responses may correlate with clinical outcome.
GSKs shingles vaccine candidate, which contains QS-21 Stimulon began a global randomized placebo controlled Phase 3 clinical trial for the prevention of shingles in immunocompromised patients. This is in addition to the studies involving over 30,000 healthy individuals which have already completed enrollment. This particular study will enroll approximately 1,400 immunocompromised patients. Separately, GSK also advanced a Phase 2b study for the tuberculosis vaccine candidate which also contains QS-21 Stimulon.
QS-21 Stimulon activity and mechanism of actions have been presented and publish by GSK and Ludwig Institute of Cancer. These important data show that the New York-ESO-1 antigen could only be placed, of course presented when delivered as a soluble protein in the presence of QS-21. These results show that QS-21 Stimulon is a critical component of vaccines particularly for the treatment of cancers.
In 2012, we also meet the qualifications to join the broad market Russell 3000 Index, the Russell 2000 Index, Russell Global Index and Russell MicroCap Indices. Lastly, we amended our QS-21 Stimulon license and manufacturing agreement with GSK to include additional rights for the use of QS-21 Stimulon in GSK adjuvant systems. In addition, we agreed to grant GSK the first right to negotiate; this not a right to first refusal, but first right to negotiate in the event of potential purchase of Agenus or certain of it’s assets.
We anticipate that the progress we saw in 2012 will continue its momentum through 2013. The two Phase 3 GSK MAGE-A3 cancer vaccine programs for the treatment of melanoma and non-small cell lung cancer are on track for pivotal Phase 3 trials to be available in 2013. That is the readout from these pivotal trials will be available this year.
There are several reasons why these specific programs have been pursued against the backdrop of many failures with cancer vaccines over the last 25 years.
Firstly, MAGE-A3 is truly a cancer specific antigenic expressed by cancer cells but not normal cells. This is an antigen which the GSK vaccine specifically targets.
Secondly, both studies have enrolled patients with cancer over express MAGE A-3.
Thirdly, patients enrolled and targeted by the vaccine are earlier stage cancer patients. This is the ideal patient population most likely to benefit from a cancer vaccine used as monotherapy. We believe one of the reasons cancer vaccines have failed historically is the fact that more trials have targeted late stage patients.
Fourthly, both studies are very large and well powered. In the melanoma trial for example, the 1,300 patients were enrolled and in the non-small cell lung cancer trial, 2,270 patients were enrolled, making this the largest non-small cell lung cancer trial conducted to-date.
And of course lastly, both vaccines contain QS-21 which is one of the most powerful adjuvants known to activate the immune system. To cover a few facts regarding these studies, patients in these studies have had their tumor fully resected. And in this setting, treatment options available to them are very limited.
We believe that a therapeutic vaccine that showed efficacy with a good safety profile could represent a paradigm shift for both patients and doctors in helping to prevent or delay recurrence of cancer. Assuming a successful clinical outcome and product launch, we are entitled to receive milestone payments and royalties on net sales for at least 10 years after commercial launch of the first vaccine in each of the prophylactic and therapeutic categories separately.
Some of the indications have separate timeline clocks that define royalty payments that are different. All of our QS-21 containing programs with the exception of HerpV are funded entirely by our projects. These programs benefit from a partner’s financial development and sales and marketing resources.
QS-21 is a unique asset which represents a significant and unusually diversified value driver for our company. It is currently being studied in 17 clinical programs in development. It is an extraordinary advantage for us to be in a position to benefit from a potential success of much larger established companies.
Let me now switch gears and discuss the status of our internal development programs. As I mentioned earlier, I am very pleased to report that our HerpV randomized double-blind multicenter Phase 2 trial in individuals infected with HSV-2 is now fully enrolled. In this trial, we screened 100 patients with a history of frequent disease recurrence.
We're on track to report initial results during the fourth quarter of this year. I would like to note that HerpV is the most advanced therapeutic vaccine in clinical development to-date. This study is evaluating the efficacy of the HerpV vaccine by measuring viral shedding before and after vaccination.
In the study, 65 participants will receive the active treatment which is HerpV, containing QS-21 Stimulon and a controlled group of 10 participants who will receive placebo. A booster injection will be given at six months after being initial treatment to evaluate both the potential of delayed effect as well as the durability of treatment effect.
Key opinion leaders in the field had helped with the design of the HerpV Phase 2 study. Experts in HSV-2 clinical research believe that a reduction in viral shedding, the driving force behind the spread of genital herpes is an important surrogate for clinical benefit defined by reduction of disease outbreaks.
I would like to highlight that our earlier clinical experience in a Phase 1 study demonstrated an unprecedented immune response with both CD8 and CD4 T cells being activated in patients vaccinated with HerpV but not in subjects receiving placebo. HerpV contains 32 HSV-2 derived immunogenic antigens and was designed with the intent of treating a broad population of HSV-2 infected individuals. We believe that if HerpV is ultimately shown to be safe and effective in late stage trials, it has a true blockbuster potential.
Now moving along to Prophage Series of cancer vaccines for the treatment of glioma patients, last year data from a Phase 1 trial for Prophage Series G-200 were published by clinical cancer research. This data show that a tumor specific immune response to peptides bound to gp96, which is a key protein ingredient in our vaccine, can be generated with autologous HSPPC-96 derived from glioma patients whose tumours have been removed by surgery. This observation provides additional evidence that individual patients specific immune responses may correlate with clinical outcomes.
Largely due to these findings as well as other Prophage Series data that has been generated in glioma, the National Cancer Institute, the NCI approved the study of Prophage vaccine in a large randomized Phase 2 trial in combination with Avastin which is a standard of care, in patients with surgically resectable recurrent glioblastoma.
This study will investigate the combination of Prophage and Avastin in a three-arm randomized study in approximately 220 patients. Efficacy will be compared between Prophage given with Avastin, either concurrently or upon progression rather versus Avastin alone with a primary endpoint of overall survival.
This study which will be sponsored by an NCI cooperative group called the Alliance for Clinical Trials in Oncology is anticipated to begin enrollment in the near future. In addition to the recurrent GBM study with Prophage, and the planned Phase 2 NCI study and Phase 2 trial evaluating Prophage in patients with newly diagnosed glioma is underway.
We anticipate that an update of this trail will be presented at a major medical meeting during the second quarter of this year. Let me now talk briefly about the status of our partnership with NewVac in Russia for Oncophage. While our Russian efforts have taken sometime to get up the ground, NewVac is now in the final stages of establishing their commercial process and we anticipate that they will be in a position to officially begin selling Oncophage applied biogenis in the first half of this year. In parallel, NewVac is building with its own money a manufacturing facility in Russia and is also preparing to initiate further clinical development of Oncophage with an emphasis on combination treatment.
Before opening the call for questions I would like to note that this year could be a very important year for therapeutic vaccines in clinical development with important data readouts. If these studies are targeted we believe that therapeutic vaccines to treat cancer and even infectious diseases could drive a paradigm shift in the way patients are treated in the future and will become a larger focus for pharmaceutical and biotech industry as was the case with for example antibodies some 15 years ago when the first success with an antibody treatment was attained.
Let me close by briefly reviewing once again our anticipated milestones for the remainder of 2013. For GSK programs involving QS-21 results from the two MAGE-A3 pivotal trials in melanoma and non-small cell lung cancer are expected to be released this year. For the HerpV containing QS-21 program data from the HerpV phase 2 study the initial data is anticipated by the end of this year.
For Prophage programs, we expect to begin enrolment in a randomized NCI Phase 2 trial of Prophage in combination with Avastin in patients with surgically respectable recurrent glioblastoma. Now note that this is a very first randomized large study of Prophage with a combination agent. We also expect that update on the newly diagnosed GBM study with the vaccine G-100 and the final results from the recurrent GBM study with G-200. And of course as I just mentioned we expect to launch Oncophage in Russia through our partner NewVac.
In closing, in addition to being an important year for the therapeutic vaccine category this is a very exciting time for our company between Agenus and our partners the upcoming milestones could be of great value to us and of course to our shareholders as well as our partners and the industry. Thank you for your interest in our company. We hope that you have found this update to be helpful and I will now conclude my remarks. We are now ready to open up for questions.
(Operator Instructions) And your first question comes from Joe Pantginis with Roth Capital Partners.
Joe Pantginis - Roth Capital Partners
A few questions Garo if you don't mind, first with the HerpV program having a little bit of, if we could look forward a little bit assuming the data are positive in the fourth quarter. If you could dive a little more into obviously the feedback you've been getting to [KOLs] regarding viral shedding being an important corelator or a biomarker if you will. So can you sort of link that up with any potential regulatory discussions you or others might have had with regard to the importance of that endpoint and how we will play a role in the pivotal study?
Okay, and thank you Joe for the question. So it is clear to us and to the [KOLs] that this endpoint alone would not be sufficient for regulatory approval consideration. That’s clear, only because there has been no validation of this any particular endpoint from a regulatory perspective. There has been no validation with ultimate clinical outcomes and we hope that this study will establish the first step of the relevance of viral shedding to the immunological response that we have seen in the Phase 1 study and what's that done, the next step is to show in a Phase 2b study the connection between viral shedding and observe clinical endpoints such as outbreaks in herpes patients. So that would be the aim of the second study before we proceed to a Phase 3 study.
Now it seems to be clear and a consensus has emerged among the [KOLs] that if we can achieve a 30% plus reduction in viral shedding, this would be a very, very important determinant to expect a clinical benefit. So that’s where we are right now and they also believe that if we can show a reduction of the short in viral shedding, this will be a very, very meaningful accomplishment in the clinic from the perspective of the large companies conviction as to the efficacy of a therapeutic vaccine for genital herpes.
Joe Pantginis - Roth Capital Partners
The next question is, it's look like 2013 obviously you are going to have a big ramp up with your internal programs with HerpV and also the two Prophage programs or front line and recurrent. So I just wanted to sort of gauge how you are going to look, I know obviously it will be very data driven, but how you are going to look to prioritize all of these programs and how that might sort of fit into any business development role as well?
Okay. So this is a very uncertain question not just with this year but for next five years and how the company will position itself in making a transition from a money consuming entity to presumably upon the success teams with some of our partner programs to a company that will have or what we hope to be a steady flow of income in the future. So as we go through that (inaudible) the priorities for this year have been set along the lines of what I presented as our expected milestones achievements.
Joe Pantginis - Roth Capital Partners
And prioritize beyond that are in the processes of being evaluated based on certain scenarios that may drive our future, and so we will be lot more vocal as to what and how we will prioritize things once we have a better and a clear picture of the readout from how GSK MAGE-A3 program.
Joe Pantginis - Roth Capital Partners
And then the last question is speaking of MAGE, there are 17 programs is ongoing with Stimulon QS-21 with Glaxo. So if you look beyond the MAGE-A3 data of those 17 programs what is Agenus particularly excited about?
Not just us but I think our partners are excited about what QS-21 has been able to do; of course a variety of these programs in terms of bolstering the chances of success. As you know a successful vaccine particularly in therapeutic setting has two very, very important drivers, one is to accurately target the antigens in the [BV] cell whether it is cancer or infections.
So that is a very, very important driver. The second one is to make sure that patients being targeted and their disease indeed express these antigens which are the key makeup or the vaccine being studied. Thirdly, not only would we want to target the disease cell properly but we would like to make sure that we have enough [opening] response to cause the damage to the disease cell and that's where QS-21 Stimulon comes into equation and so those are very, very important considerations and I think in each of the programs the ability to be able to execute a pivotal clinical trial with the correct driver in each one of these categories becomes key.
I mean for example, even though the malaria program which we hope to be marketed in 2015 timeframe is the very first malaria vaccine that has been shown to prevent the disease, very first time in spite of the fact that malaria is a very, very difficult target and so to answer your question in a round about way, it would be inappropriate for us because of our public relationship to really single out anyone of their programs but suffice it to say because of the timelines and because of the market potential, we expect MAGE 3 to have a very substantial impact upon success.
Now aside from that, we are particularly excited about the HerpV vaccine because once again it has all these components that I spoke about and so to read out at the end of this year and final read out after the booster shot which will come next year, I think it will be something to watch very closely.
(Operator Instructions) We have a question from Megan Dow with MLV & Company.
Megan Dow - MLV & Company
Garo, you slipped in there that you are going to have an initial read out for HerpV separate from the final booster. It’s nice to hear that and do you have any other updates on the Janssen program and Alzheimer’s program we haven't heard anything from them in a while?
Right, so we do not have made any additional updates. Our understanding is that they will articulate their strategy on how they will move forward and this is based on basically public accounts that were gathered that they will articulate their strategy with regard to the Alzheimer’s vaccine program, sometime in the April timeframe, that's our understanding.
And of course with large companies its very difficult to gauge what they will do and how and we do not have a kind of relationship with them that we do with GSK for example for a continuous dialogue if you will, probably because there are so many parties involved in the process and so I'm afraid that I cannot really shed any definitive light on this.
Megan Dow - MLV & Company
Okay, alright, just thought we would try to see if there is any other update. An additional question about the Russia operation, when you are supplying the vaccine for NewVac is your reimbursement higher and above and beyond your low double-digit [royalties]? Can you comment at all about the financials is that arrangement prior (inaudible) been able to supply there on medication?
The difference because of the lower quantities involved will be somewhat immaterial, but the net to us will be of course more meaningful with the royalties than the initial supply. So having said that, just to make sure that we preferably set expectations, any commercial sales in the first half of this year will be very minor and it will be really more exploratory from a commercial perspective and from the logistics perspective, meaning shipping to and back and forth to (inaudible) and vaccine in to Russia, will be exploratory, and once their manufacturing facilities are up and running, we should have until the end of this year, then that will set the stage for a higher level of sales, not tremendous sales but higher level of sales. The real boost could come when there is government reimbursement for the product which is not likely to happen until the later part of next year, but once money is available for reimbursement, then sales of this product in Russia based on our forecast and population availability could become a meaningful number.
And we have no further questions at this time. I turn the call back to our presenters.
Thank you. I would like to remind listeners that our replay will be available approximately two hours after the call to midnight eastern time on April 25, 2013. The replay number is 855-859-2056 domestic, or 404-537-3406 international. And the access code is 14310694.
The replay will also be available on the company’s website approximately two hours after the call. Thank you very much for listening to the call today. And if you have any questions you can always call us at 800-962-2436.
And this concludes today’s conference call. You may now disconnect.
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