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Agenus Inc. (NASDAQ:AGEN)

Q1 2013 Earnings Call

April 24, 2013, 11:00 am ET

Executives

Jonae Barnes - VP, Investor Relations & Corporate Communications

Garo Armen - Chairman & CEO

Christine Klaskin - VP, Finance & Principle Financial Officer

Analysts

Megan Dow - MLV & Company

John Sonnier - William Blair

Mike King - JMP Securities

Jason Kolbert - Maxim Group

Operator

Good day ladies and gentlemen and welcome to the Agenus Q1 Earnings Report Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jonae Barnes, Vice President of Investor Relations and Corporate Communications. Please go ahead Ms. Barnes.

Jonae Barnes

Thank you and good morning everyone. Welcome to Agenus’ conference call to discuss the financial results for the first quarter of 2013. 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 stream, development and commercialization efforts, timelines, availability of data, 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 US Securities and Exchange Commission.

These statements speak only as of the date of the 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 turn the call over to Christine to review our financial results for the first quarter of 2013.

Christine Klaskin

Thank you, Jonae. Good morning everyone and thank you for joining us on today’s call. Some of the statements I'll be making are also contained in the press release issued this morning.

As of March 31, 2013, our cash and cash equivalent balance was $17.2 million. Our cash used in operating activities for the first quarter ended March 31, 2013, was $3.9 million compared to cash provided by operating activities of $11.3 million for the same period in 2012.

For the first quarter, we reported a net loss attributable to common stockholders of $8.8 million or $0.35 per share compared with net income attributable to common stockholders in the first quarter of 2012 of $6.6 million or $0.29 per share. The increased net loss for the first quarter of 2013 compared to the net income for the same period in 2012 is directly related to the revenue generated of $13.4 million in the first quarter of 2012 primarily due to the one-time payment received through an expanded agreement with GlaxoSmithKline and through a license of non-core technologies.

In addition, the issuance of common stock to the company series A-1 comparable preferred stock holder resulted in a non-cash deemed dividend of $2.9 million for the first quarter of 2013. Based on our estimated net cash burn for 2013 which is defined as cash used in operating activities for capital expenditures, we expect sufficient capital, financial resources to fund operations into 2014.

This concludes the financial portion of the call. Garo will now provide a corporate update.

Garo Armen

Thank you, Jonae and Christine and thank you for all to be with us this morning. As 2013 gets underway, we are anticipating key data readouts from our internally developed programs. These include Prophage-G vaccines for the treatment of glioma and our HerpV vaccine for the treatment of genital herpes. Also, our programs with QS-21 containing vaccines, GSK’s MAGE-A3 cancer vaccine for the treatment of melanoma and non-small cell lung cancer. The MAGE-A3 programs are expected to have pivotal Phase-3 data readouts this year.

In addition, we are also advancing a new internal development program that we believe has the potential to meaningfully advance our vaccine adjuvants platform. This comprises our next-generation adjuvants and could have the potential to bolster the activity of existing as well as new vaccines and possibly have activity as standalone therapeutics.

I am pleased to report the following highlights which marked our progress year-to-date. First, we have completed patients screening for our Phase 2 randomize double-blind multicenter study for HerpV, a recombinant therapeutic vaccine candidate for the treatment of genital herpes in patients who have herpes. The study will test the biological efficacy of HerpV vaccine as measured by affect on genital viral shedding. We anticipate data from this trial during the fourth quarter 2013.

Two new Phase 2 data for Prophage Series G-100 trial will be presented at the 81st American Association of Neurological Surgeons Annual Scientific Meeting. The presentation will be given during a Plenary Session on May 1st.

In April, in early April of this year, we eliminated our outstanding $39 million 8% senior secured convertible notes, which were due in August 2014. In addition, we entered into two separate $5 million debt transactions, so our total debt obligation outstanding has been reduced from $39 million to $10 million as a consequence of these transactions.

As we look at the rest of 2013, the two Phase 3 GSK MAGE-A3 cancer vaccine programs for the treatment of melanoma and non-small cell lung cancer are near-end completion and they will be generating earlier pivotal Phase 3 data readouts soon. So we believe that there are a number of reasons that these trials could have a potential for success against the backdrop of many failures with cancer vaccines over the last 25 years.

These specifically include the following: One, of course the advantage associated with being powered by one of the most powerful adjuvants our QS-21. Two, targeted patient population with cancers over express MAGE-A3 cancer which is a cancer specific antigen that GSK vaccines specifically target.

Three, ideal patient population for cancer treatment, can treatment with cancer vaccines. These are earlier stage patients who are most likely to benefit based on collective human and animal trial experience with cancer vaccines to date.

And fourth, very large and very well powered studies; in the melanoma trial 1,300 patients were enrolled and in the non-small cell lung cancer trial 2,270 patients were enrolled, making these among the largest trial in these cancers.

We believe that therapeutic vaccine that shows efficacy could be a paradigm shift during the treatment of cancer. Treatment sources for these patients for surgery are limited or non-existent, and given the safety profile of cancer vaccines these patients would be ideally suited and comprise a very large population. Upon commercialization as you know we are entitled to receive royalties for a minimum of 10 years as well as milestone payments as GSK QS-21 containing programs at best. As you also know, all of our QS-21 containing programs with the exception of HerpV, our own internal program are funded entirely by our partners. In that regard, 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. Let me now switch gears and discuss the status of our internal development programs. As I mentioned earlier, our HerpV randomized double blind, multi-cancer Phase 2 trial in individuals infected with HerpV 2 is fully screened for enrolment. This puts us 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 today. This study is evaluating the efficacy of HerpV vaccine by measuring viral shedding before and after vaccination. In the study 65 participants will receive HerpV which contains QS-21 and a control group of 10 participants who will receive placebo. A booster injection will be given at six months after the initial treatment to evaluate both the potential of delayed effect as well as the durability of treatment effect.

Key opinion leaders in the field have helped design the HerpV Phase 2 study and HSV-2 experts believe that a reduction in viral shedding, the driving force behind the spread of genital herpes is a key surrogate which could be predictive of clinical benefit defined by reduction of disease outbreaks. Among the unique attributes of HerpV is the fact that it 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 a safe and effective product in late stage trials, it would represent a breakthrough in the treatment of herpes.

Now moving along to Prophage cancer vaccines for the treatment of glioma patients. Clearly we are particularly excited about our NCI alliance sponsored 222 patients randomized glioma trial of Prophage in combination with Avastin. Enrolment will begin during the current quarter for the treatment of recurrent glioblastoma. This study is being sponsored by the alliance of clinical trials in oncology or the alliance group, a cooperative group of the National Cancer Institute. The trial is expected to enroll 222 patients in treatment centers across the United States and is the largest brain tumor trial ever funded by the NCI and it's also the largest vaccine study ever conducted with Avastin.

We believe this trial represents an important step in our efforts to develop effective vaccines for patients with brain tumors. The significant commitment to this trial from the NCI also reflects the emerging promise of vaccines as potential treatment options for millions of people with different forms of cancer. Separately, a Phase-2 Prophage trial with G-200 in recurrent GBM has been completed and the final data are in the process of being prepared for publication in a pre-reviewed medical journal. In addition, as I mentioned earlier, the new Phase-2 data for the Prophage series G-100 trial will be presented again at the 83rd American Association of Neurological Surgeons Annual Scientific Meeting and as I mentioned earlier, again the presentation will be given during a primary session on May 1.

Switching gears to our Russian efforts with NewVac; NewVac is in final stages of establishing their commercial facility in Russia and is also getting ready to launch product. In parallel, NewVac is also preparing to initiate certain clinical development of Oncophage in Russia with an emphasis on combination trials. 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 readout. If these studies are positive, we believe that therapeutic vaccines to treat cancer and infectious diseases could drive a paradigm shift in the way patients are treated in the future and will become a larger focus of pharmaceutical and biotech industry as a case would anybody were from 15 years ago. This is a very exciting time for our company between Agenus and our partners, the upcoming milestones could be a great value to us and our shareholders as well as our partners.

Thank you for your interest in our company. We hope that you have found this update to be hopeful, and I will not concludes my remarks we are now ready to open up for questions.

Question-and-Answer session

Operator

Thank you. (Operator Instructions) We will now take our first question from Megan Dow of MLV & Company. Please go ahead.

Megan Dow - MLV & Company

Hi everyone congratulation on your restructuring activity and the success of the quarter, and thanks for taking my call. Garo you mentioned that about your next generation adjuvant program under development. I was hoping you could expand on what's going on?

Garo Armen

Megan we just have started this effort. It's about maybe a year old or so and because of intellectual property and other competitive considerations, we have not been ready to go public with details. So the purpose of my mentioning was simply that there is special efforts to think about the next generation of adjuvant particularly during the period when cancer vaccines is driven by adjuvant and shortly other therapeutic vaccines maybe come and increasing focus in the next couple of years as advances are made in the field.

So in the context of that, we have concentrated our efforts on what we can do to specifically address the profile that current adjuvant provide and how that maybe advancing in the context of helping more advances in therapeutic vaccines come to fruition.

Now in addition to that there are also data points that have been published in the past with our adjuvant QS-21 where the performance and the adjuvant alone may have some therapeutic activity. With the advancement in the vaccine adjuvant field, we are also particularly cognizant of this fact and are looking at the possibility of next generation adjuvants having standalone activity in a variety of diseases. So its early to elaborate on it, but stay tuned and we will update you as advances are made in our IP position is strengthened……….

Megan Dow - MLV & Company

It sounds exciting. And then I was hoping you could tell us what we can expect as far as data for the interim analysis of the HerpV program in the fourth quarter. Are you going to be announcing immunological data, shedding data, what can we look forward to there?

Garo Armen

We will announce in the fourth quarter of this year some of the preliminary viral shedding data.

Operator

We will move to our next question from John Sonnier of William Blair. Please go ahead.

John Sonnier - William Blair

Thanks for taking the question. Garo also on the herpes vaccine, where would you see the natural inflection point to partner that asset, would that be with setting data, would you need something more than that optimally?

Garo Armen

John, based on what we have been told by some of the very, very astute key opinion leaders in the field right a long history with the development of these types of products, we are told that if we can achieve viral shedding results where there is a reduction of say 30% to 50% in viral shedding post services pre-vaccination that would be deemed as very exciting by the industry. So to answer you directly depending on the outcomes of course, viral shedding data could be sufficient for partnering this program.

John Sonnier - William Blair

Okay, that's helpful. And just I guess a bit of a housekeeping item with [Dr. Parse’s] move, does that have any bearing on the enrolment timelines of glioblastoma trial? Thanks.

Garo Armen

If anything John, we think it would be a very big positive. As you may know he’s moving to Chair the department in Chicago and Alliance Group is also based in Chicago. So there has been already in the past a very close collaboration between him and his peer heading this, our efforts on behalf of Alliance and that would only be strengthened with his new move.

John Sonnier - William Blair

Perfect. Thanks a lot.

Operator

Thank you. We will move to our next question from Mike King of JMP Securities. Please go ahead.

Mike King - JMP Securities

Thanks. Good morning. Thanks for taking the questions. Just a couple of quick things. First of all, I jumped on a few minutes late so I apologize if you covered financial guidance Garo, but wondering if you could just help us out understanding you know current cash, how long you think it will carry you to and then perhaps you could help us get a bit more color on revenue for the remainder of the year in terms of breakdown and grant monies, service fees, etcetera.

Garo Armen

Okay. So we did cover some of that Mike.

Mike King - JMP Securities

Okay. Then maybe we can follow up offline, I apologize.

Garo Armen

Okay. No, I mean, just to repeat our cash balance is $17.2 million. We've earned approximately $3.9 million in the quarter and we gave guidance that we have the sufficient cash resources into 2014. In terms of what was your other question?

Mike King - JMP Securities

No, I was just asking for the components of the revenue breakdown, but we can take it offline with Christine.

Garo Armen

Okay. I mean potentially milestones coming up perhaps towards the end of this year, but we haven't accounted for those in our projections.

Mike King - JMP Securities

Okay, fair enough. And then if you could just, we were on the Glaxo call earlier today and don’t know if you listened in, but they were asked about the MAGE programs and already was in response said that they thought that perhaps melanoma results could be out this year and thought that lung cancer results might be out next year. I was wondering if you could help us interpret, I mean I have my thoughts on the interpretation of that, but I wonder if you guys could let us know what do you think about those comments and whether those drive with your internal thinking?

Garo Armen

I mean, I think we know what you know, nothing really more than that. We are pretty confident that melanoma would be out this year, perhaps in coming months. In terms of lung cancer, we don’t know the definitive timing; it could be perhaps towards the end of this year, earlier next year. It depends on the events and nobody has a magic ball if you will exactly when the events are going to be completed. They count them as they come in. So the exact timing may not be predictable, but the exact timing is within months. So what you would think is state. So other than that, I am afraid we don’t know anymore than you do.

Mike King - JMP Securities

Okay. I just -- I don’t want to jump to conclusions, but I was just wondering if, it sounded like lung could be a bit of a slip, maybe I am incorrect and had assumption, but I could also interpret that as a good thing since it’s an event driven analysis and if the events are stretching out then may be some benefits resulting from that?

Garo Armen

We are not the world experts in event driven trials. As you know we did our launch many, many years ago. And with events is I said it's very difficult to predict because there are months where the frequency of events accelerates and then it slows down and then reaccelerates again, that’s why I wouldn’t necessarily read anything into it, one way or the other.

Mike King - JMP Securities

Okay, all right. Thanks for taking the questions.

Operator

(Operator Instructions) We will move to our next question from Jason Kolbert of Maxim Group. Please go ahead.

Jason Kolbert - Maxim Group

Hi, Garo, thank you. I just have one question. Mike got most of mine answered, but I wanted to talk about the GBM trial since this is reoccurrence GBM, is there an entry criteria that eliminates patients that have had prior, any prior immunotherapy even if it was experimental and trial based?

Garo Armen

Yes.

Jason Kolbert - Maxim Group

Got you, okay. Thank you very much.

Garo Armen

Sure.

Operator

Thank you. There are no further questions at this time, please continue.

Jonae Barnes

I guess we can end the call here. Thank you, everyone. I would like to remind listeners that a replay will be available approximately two hours after the call through midnight Eastern Time on June 25, 2013. The replay number is 416-915-1035 and the access code is 735470. The replay will also be available on the company’s website approximately two hours after the live call. Thanks again. And if you have any additional questions at today's call, you may call us at 800-962-2436.

Operator

Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.

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