Immunomedics' CEO Discusses F2Q 2014 Results - Earnings Call Transcript

| About: Immunomedics, Inc. (IMMU)

Immunomedics, Inc. (NASDAQ:IMMU)

F2Q 2014 Earnings Conference Call

February 11, 2014 10:00 ET

Executives

Dr. David Goldenberg - Chairman, Chief Medical Officer and Chief Scientific Officer

Cynthia Sullivan - President and Chief Executive Officer

Peter Pfreundschuh - Vice President, Finance and Chief Financial Officer

Analysts

Matt Palmer - Oppenheimer

Chris Hamilton - R.F. Lafferty

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Immunomedics Incorporated Second Quarter Fiscal 2014 Financial Results Conference Call. As a reminder, this call is being recorded. Today is Tuesday, February 11, 2014.

With us on the call this morning are Dr. David M. Goldenberg, Chairman, Chief Medical Officer and Chief Scientific Officer; Cynthia Sullivan, President and CEO; Peter Pfreundschuh Vice President, Finance and CFO.

I would now like to turn the conference over to Peter Pfreundschuh, Chief Financial Officer of Immunomedics. Please go ahead.

Peter Pfreundschuh - Vice President, Finance and Chief Financial Officer

Good morning and welcome to our earnings call. I will begin with a summary of our current financial condition. Cynthia Sullivan, our President and CEO will follow with our comments on our three main programs. Finally, Dr. Goldenberg will update us on the status of the Phase 2 trials with our two solid tumor antibody drug conjugates as well as other early stage product candidates before we open up the call for questions and answers.

Before we begin, I would like to remind everyone that during this call, we will be making forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements may involve significant risks and uncertainties and actual results could differ materially from those expressed or implied in the call. For factors that could cause such differences, please refer to our regulatory filings with the Securities and Exchange Commission and most recently our Annual Report for the year ended June 30, 2013.

Now, let me start with the financials. I hope that everyone has had a chance to review the financial results that we released yesterday afternoon. The earnings report is available on our company website at www.immunomedics.com.

Total revenues for the second quarter of fiscal 2014, which ended December 31, 2013 were $1.2 million as compared to total revenues of $0.8 million for the same quarter last fiscal year. The increase of $0.4 million in total revenues this quarter was primarily the result of $0.2 million improvement in LeukoScan sales volume in Europe and $0.2 million higher research and development revenue due to the timing and number of research activities from research grants.

Total costs and expenses for the quarter ended December 31, 2013 were $9.8 million as compared to $8.4 million for the same period in 2013, representing an increase of $1.4 million or 17%. The increase was driven primarily by $0.8 million increased research and development expenses or increased clinical trials and product costs, which include the initiation of Phase 3 PANCRIT-1 registration study of yttrium-90-labeled clivatuzumab tetraxetan for therapy of patients with advanced pancreatic cancer. In addition, general and administrative expenses were $0.3 million higher due primarily to increased legal expenses incurred as part of the arbitration proceedings with Takeda-Nycomed.

Net loss attributable to our stockholders this quarter was $8.5 million or $0.10 per share. This compares to net loss attributable to our stockholders of $5.2 million or $0.07 per share for the same quarter in fiscal 2013. The $3.3 million increase in net loss this quarter is primarily due to higher research and development expenses and a reduction in other income as a result of $2.5 million of non-recurring insurance proceeds received in fiscal 2013.

For the first half of fiscal year 2014, total revenues were $6.7 million as compared to total revenues of $1.9 million for the same period last fiscal year. The $4.8 million increase in total revenues this period was primarily due to $4.6 million in increased licensing fee revenue earned upon fulfilling the company’s obligation under the Algeta Service Agreement, as amended.

Total costs and expenses for the six-month period ended December 31, 2013 were $20.9 million as compared to $16.8 million for the same period in 2012, representing an increase of $4.1 million or 24%. This increase was driven primarily by $1.9 million higher research and development expenses, mostly from increased manufacturing costs for clinical materials of the antibody drug conjugate trials and the deferred expense of $1.2 million for the licensing fee and other revenue related to Algeta Service Agreement and approximately $0.5 million of increased legal expenses.

Net loss contributable to our stockholders this period was $14.1 million or $0.17 per share. This compares to the net loss attributable to our stockholders of $12.3 million or $0.16 per share for the same period last fiscal year. This increase in net loss of $1.8 million in this period was due primarily to $4.1 million increase of costs and expenses mainly from clinical trial-related research and development activities, which was partially offset by higher licensing fee revenue in the fiscal period, net of insurance proceeds received in the previous year. The company has no long-term debt as of December 31, 2013. Cash and cash equivalents and marketable securities totaled $26.8 million.

We are pleased that the start of our Phase 3 PANCRIT-1 trial was according to our aggressive schedule and we continue to make clinical progress with our antibody drug conjugate programs. We expect that funding for this trial will come from revenues related to our business development activities along with other sources of capital.

This summarizes our financial results for the second quarter of fiscal year 2014, I will now turn over the call to Cynthy.

Cynthia Sullivan - President and Chief Executive Officer

Thank you, Peter and good morning everyone. This morning I would like to align my comments to the priorities communicated within our new corporate presentation, which many of you have had an opportunity to review. As outlined in this presentation that can be found on our website. There are three main programs driving our business: One, our partner UCB’s development of epratuzumab in patients with lupus; Two, our progress with clivatuzumab tetraxetan in patients with late stage pancreatic cancer; And three, developments regarding our two antibody drug conjugate or ADC programs. I will also highlight the milestone events related to these opportunities which we plan to deliver over the next 12 to 18 months.

With regard to the lupus program UCB has guided to full patient enrollment into the Phase 3 trials this quarter with top line data expected in the first quarter of calendar year 2015. You remember that each Phase 3 trial will enroll about 800 patients with moderate to severe lupus. Even with the approval of Benlysta, we firmly believe this autoimmune disease is in need of more therapeutic options and therefore lupus remains an attractive indication for new product development with a significant market potential.

We are particularly encouraged by the quick acting results with epratuzumab in decreasing lupus disease activity, which was observed in UCB’s Phase 2b EMBLEM study. Following the EMBLEM study the open label extension trial further demonstrated that treatment with epratuzumab maintained reduction in disease activity and in some patients also decreased the use of corticosteroids over time. This is an important – this is important, because the side effects of corticosteroids therapy can sometimes be more debilitating than lupus itself. In fact, reduction of steroid use is an essential and key element of clinical benefits and quality of life measures for lupus patients.

Moving on to our pancreatic cancer therapeutic candidate the yttrium-labeled clivatuzumab tetraxetan, we launched the PANCRIT study according to our timeline. This is our Phase 3 clinical trial enrolling patients who have received at lease two prior therapies for their disease. While new drugs such as Abraxane plus gemcitabine have recently been approved as top line treatment for pancreatic cancer, for patients who have relapse there are no FDA approved therapies and currently available treatment options are a few. In our prior studies with the yttrium-labeled clivatuzumab tetraxetan in a setting of at least third line therapy, the median overall survival for the group receiving this agent combined with low dose gemcitabine compared to only giving the radio-labeled antibody without gemcitabine was significantly increased. The combination of the yttrium-labeled antibody and low dose gemcitabine produced a median overall survival of four months in this Phase 1b trial. For patients who received multiple cycles of therapy, median overall survival increased to 5.2 months. Furthermore, 2 of the 27 patients or 7.4% of the patients in the combination arm had partial responses based on RECIST criteria of more than 30% tumor shrinkage by CT imaging. This includes one patient who has received seven cycles of treatment to-date. We continue to monitor three surviving patients from this trial with one patient alive for 17 months and the other two patients surviving more than 11 months after receiving the combination treatment.

We believe this is the first randomized trial of candidate therapeutics studied in the third line setting of advanced pancreatic cancer, which proves that it’s feasible to treat such patients and that there is a need in this setting for new therapy. We are therefore very encouraged with the activity demonstrated by yttrium-labeled-clivatuzumab tetraxetan in combination with low-dose gemcitabine in patients with more advanced than refractory disease. As far as milestones associated with this program, we look forward to completing patient enrollment into PANCRIT-1 in the first half of 2015 and the reporting results in 2016.

We anticipate that we can market this in the U.S. and that we have the manufacturing capacity for commercial scale quantities, because relatively small amounts of the antibody are needed for each injection. Outside the U.S., we would be interesting in partnering this asset. I am very grateful and proud of the entire Immunomedics team and our outside collaborators for the remarkable and timely launch of our PANCRIT-1 clinical trial. As Peter mentioned, we expect that funding for this trial will come from revenues related to our business development activities, along with other sources of capital.

Before I finish off with a brief discussion on the antibody drug conjugate program, let me bring you up-to-date on veltuzumab developments. We are in an arbitration proceeding with Takeda on what we believe was the lack of performance by Nycomed and Takeda related to the development of this product. In the meantime, the transitioning of veltuzumab back to the company is in process. Once this is completed and we are in full control of all the rights, we believe we’ll be able to discuss our future plans for this antibody. We are pleased that we have received interest from third-parties concerning the out-licensing of veltuzumab and discussions are progressing.

Finally, the last active area of business development is with our antibody drug conjugates, IMMU-130 and IMMU-132. Currently, we are in discussions with several parties for potential out-licensing arrangements. We planned to have updates on the Phase 2 data on both IMMU-130 and IMMU-132 in the second calendar quarter of 2014. Furthermore, we are pleased that our application to designate IMMU-132 as an orphan drug for the treatment of small cell lung cancer was recently approved by FDA.

So in summary, we are not a company with a single product or even a single technology as you will appreciate further when the science is discussed. At present, we have three major pillars being advanced. One, for the therapy of autoimmune diseases led by lupus with epratuzumab in our partnership with UCB; the second, our pancreatic cancer therapeutic candidate, yttrium-90-labeled clivatuzumab tetraxetan; and third, our candidate ADC product for the therapy of advanced solid cancers.

David will now update the status of the Phase 2 trials with the two ADCs as well as our other early stage product candidates.

Dr. David Goldenberg - Chairman, Chief Medical Officer and Chief Scientific Officer

Thank you, Cindy. For those of you who have followed our company for many years, I am sure we are all pleased to hear our CEO state clearly that we are focused on three development programs; one, being epratuzumab for lupus therapy and other being our radio-labeled antibody for the treatment of advanced pancreatic cancer, and the third program very aggressively pursuing our novel antibody drug conjugates representing an exciting new area of commercialization in cancer therapy.

In addition to directing the clinical development efforts, my responsibilities have included supporting innovation by advancing our novel technologies and product candidate. In this regard, I am delighted that the Patent Board elevated our rank as an innovative and biotechnology from A in 2012 to fourth in 2013 for the quarter analyzed. We are pleased to follow after Roche Holding Limited, Amgen, and Biogen-Idec in the first three spots. This was based on the scientific and technology strength of the 39 U.S patents issues to us in a 13-week period coverage. Internally we have already expanded our clinical research and regulatory departments with experienced senior individuals joining us for major pharmaceutical companies. And I am pleased to acknowledge that I have already noted their positive impact on ongoing trails including the implementation of our Phase 3 PANCRIT-1 study.

We are interviewing candidates for Chief Medical Officer, a position that is critical as we advance our products to registration trails. Our IMMU-132 and IMMU-130 ADC studies are also expanding rapidly, thus requiring more support internally. As I explained during our last calls the IMMU-132 anti-TROP-2 ADC is being studied in patients with diverse solid cancers after their prior standard therapies. Our initial results showing objective responses in colorectal, triple negative breast and small-cell lung cancers stimulated us to expand these patient populations in a Phase 2 extension of these trails. And we have indeed made good progress and also confirm the activity in small-cell lung cancer with a second partial response. And the other two cancers with too much shrinkage that continues while additional patients would be other cancer types are showing very encouraging evidence of both tolerability and tumor stabilization.

To-date we have studied IMMU-132 in the Phase 1 portion in 25 patients. Additional patients are now enrolling in the Phase 2 extension, but it is too early to asses many of those enrolled recently. We shall update our results when these become available and we also plan to present our results at cancer conferences in the spring. We expect to have about 12 study sites participating in this trail which will contribute to a rapid enrollment of not only the major three cancer types of interest but also some other tumor types that are showing evidence of response to our therapy.

The treatment regiment with IMMU-132 was weekly for two weeks and then one week offer three weeks cycle, in contrast to almost all other ADCs in developing and testing by others. This ADC as well as our other program IMMU-130 appears to be tolerated for a longer course of therapy. The longer we can continue treatment, the higher the prospects of sustained responses. For example in one patient with advanced colon cancer who failed two prior therapies, our IMMU-132 investigational agent has been administered for 32 doses over many months. And this showed a continuing partial response involving a 65% shrinkage of target tumors on the treatments for about 11 months. This patient has not shown any major toxicity during this long-term therapy. And I want to emphasize that patients have in receiving repeated treatments without developing antibodies to the ADC either the antibody or the drug. We suggest that we may have in fact developed a chronic therapy.

As I already said, this is different from the usual chemotherapy or even use of most other ADCs. I think this is because most other ADCs usually involve supertoxic drugs, which take their toll on normal tissues of the patients, limiting both the dose given and the duration of therapy. SN-38, the active form of the well-known cancer drug, irinotecan, is not supertoxic, so it can be given repeatedly in many patients even at higher doses of both drug and antibody. We believe this results in a higher ratio of therapeutic action to toxicity or an improved therapeutic index, which is key to achieving responses. We believe this is a new paradigm in antibody-drug conjugate therapy and Immunomedics is an innovator of this principle and approach. Our experience with our second solid tumor ADC, IMMU-130 which targets CEACAM5 is quite similar, but this drug is not as advanced as the former one.

We completed a Phase 1 trial in advanced colorectal cancer patients who failed prior therapy at least one being with irinotecan. This involves dosing every other week and we found that patients could sometimes tolerate doses for months and even observe the partial response in a patient who progress through lung metastases and growth of this very large liver metastasis after failing an irinotecan-containing therapy.

Since our SN-38 conjugate affects a particular phase of the cell cycle, we have reasoned them more frequent dosing would be more effective and then implemented another trial with twice weekly as well as once weekly therapy for two weeks and then one week off as a treatment cycle. We are actively enrolling patients in these more frequent dosing trials already observing a partial response in evidence of disease stabilization while most patients are still awaiting their first CT scans to determine response. As with IMMU-132, this ADC has been tolerated already up to 32 injections with dosing given twice weekly. The particular patient getting this long-term therapy also had a partial response already at three months after starting therapy and confirmed again at four months showing a shrinkage of 63% of target tumors measured by computed tomography. In this IMMU-130 trial, we also anticipate having about at 11 centers participating. So it is expected that this will also experience rapid enrollment in the next month. We plan to present our interim results at an oncology meeting this spring.

Our goal is to gain sufficient safety and efficacy information now that we have established the tolerable dosing schedules to guide us in further development of these assets in particular cancer types once our expansion studies are completed. We hope to do this with a former partner that can move quickly into registration trials and can expand the trials into multiple tumor types. Although our clinical group is small in number, I’m proud that our team is very devoted and now has been able to implement such multi-standard trials at our two solid cancer ADCs. This could not have been accomplished without the enthusiasm and commitment of a core group of permanent oncology investigators from well-known institutions.

Although the other technology assets that are not yet in the clinic are of less interest to you today, I cannot restrain my enthusiasm as most of you know of me. First with the promise of our SN-38 ADC technology evidenced by these first two antibodies, we of course are studying the prospects of advancing a number of other proprietary antibodies to new SN-38 ADCs and already preclinical studies validate this potential. We plan to publish some of these promising results in the cancer (indiscernible) in the future.

The second program that excites me is also very – in a very competitive area. As the press and video media have related the most recent other exciting area of cancer therapy involves immunotherapy either with checkpoint inhibitors or retargeting T-cells that attack the cancer cells. There are various approaches to T-cell immunotherapy and we have decided to modify one that has shown clinical promise. This involves making a bispecific antibody whereby one arm binds to the tumor and the other arm captures the patient’s own T-cells retargeting these T-cells to the tumor in this way. Our goal was to make a construct that did not require an indwelling catheter for continuous infusion of low doses in order to overcome toxicity and to also reduce the (indiscernible) uptake in the brain thus avoiding central nervous system toxicity. Our own DNL methodology has permitted us to make such bispecific antibody constructs that we believe can achieve these attributes. And alongside this, we have invented another companion method that has enhanced this T-cell therapy, so that we actually achieve tumor regressions and cures in human solid tumors growing in single mice. Some of these results will be presented at the forthcoming annual meeting of the American Association for Cancer Research in San Diego in April and is also being prepared for publication.

Thank you all for your interest and continued support. And we will now welcome questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Boris Peaker of Oppenheimer. Your line is now open.

Matt Palmer - Oppenheimer

Good morning and thank you for taking the questions. This is Matt Palmer in for Boris. First off, I was wondering if you could address the need for additional capital to fund corporate operating activities in terms of sources of funding and timing. I know you mentioned that you expect the PANCRIT-1 funding to be covered by business development activities. Is it correct to assume that these discussions are for the o-U.S. rights to clivatuzumab? And if that is correct in an assumption then one has an agreement already been reached and what might be the sticking points there?

Dr. David Goldenberg

Let me step in. There is probably a little misunderstanding. The firming of the PANCRIT trial is we expect more probable from the other licensing discussions we are having and then with our ADC assets, which are showing such encouraging results. These are well along in discussions and we hope that this will be the first approach to meet our financial needs. The PANCRIT of extra U.S. partnering that could give us funds for that program is not as imminent as we believe the ADC partnering is as well as other assets that are being discussed with third-parties. Peter, do you have anything to add to that?

Peter Pfreundschuh

Yes. I would just reiterate what David said. For us, our main focus is really around the ADC programs from a business development perspective. And I think Cynthia also alluded to in her comments that we also have a fair amount of interest relative to the veltuzumab product. So with that being said, those is really our main focus around business development right now as the intent was obviously to use funding from that relative to the clivatuzumab program and it is the intent of the company as we sit today really to develop our products on our own, move that forward on our own right now as we said.

Matt Palmer - Oppenheimer

Okay, that’s helpful. And maybe one more, so more patients are being treated for pancreatic cancer with Abraxane today. I am curious how does the introduction of Abraxane change the dynamics in terms of treatment within that space? And if you can shed in your light on whether or not that will impact the PANCRIT-1 study enrollment?

Dr. David Goldenberg

Well, from my perspective, this is David Goldenberg, it’s only helpful. Although, the statistics in survival of pancreas cancer have not changed appreciably in the last decade, we and many investigators are noting that many more patients can tolerate more frequent therapies. We are delighted that there is a new therapy beyond gemcitabine and Tarceva for a frontline therapy, namely Abraxane plus gem and this will I hope give more patients an opportunity to go further in therapy both second and third line. As we are positioning PANCRIT-1 it’s a third or later line therapy and the first challenge we had and many of our investigators are curious, could we actually conduct a trial in this late setting of pancreas cancer with patients be available and benefit from this kind of therapy so late in their course of treatment of this disease. And the first the astounding result we got, it was that we enrolled in this trial probably faster than any other trial in eight months with maybe 5 or 6 centers leading the enrollment, although we had about 12 involved. We enrolled 58 patients. And when we stopped the trial, we were having a lot of complaints from our investigators that they had many more patients waiting to come into the trial. So we rush very quickly to get the registration trial organized. So there is a need in third or fourth line therapy of pancreas cancer. That’s the first observation that has ever been made and we are very proud that we were able to do this with our investigators.

The second is that even in this setting, we were able to show some benefit. We were able to show that we could prolong with the combination, survival in a statistically significant way. Although these are very small numbers, the significance was there at 0.02. So we just believe that if we can increase the numbers in our Phase 3, we should do even better although we all appreciate Phase 3 trials are never as good as Phase 2 trials usually. But nevertheless, we have designed a trial comparing the combination to just gemcitabine, I am sorry, low-dose gemcitabine with best supportive care. There is a good reception to this. We are organizing this on a multinational basis. We have a lot of the world’s opinion leaders involved and we are very excited that a) we can show that patients can benefit, longer this patient although it’s one patient, 17 months in the start of therapy is unprecedented. And this patient is now in the eighth cycle, not completely get a therapy with our agent. So, it’s not only was tolerated well, that’s showing extension of life. And that’s what it’s all about. And secondly, this is the first radio-immunotherapeutic that has ever shown activity in the solid cancer. As you know, they have been approved in (indiscernible) liquid tumors and have not been as adopted as well as we think it will be in solid tumors, because there is nothing available in these solid tumors that are like pancreas cancer coming to third line of therapy. Sorry, it takes so long to answer your question.

Matt Palmer - Oppenheimer

That’s okay. Thank you for taking the questions.

Operator

Thank you. And our next question comes from the line of Chris Hamilton of R.F. Lafferty. Your line is now open.

Chris Hamilton - R.F. Lafferty

Good morning. Thanks for taking the question. I think we have touched on this a bit already, but I was just wondering if you could give us any additional updates on the lupus trial and maybe talk about if we are still on target for Q1, 2015 readout on that trial? Thanks.

Cynthia Sullivan

Yes. Sure, I can take that. In fact, UCB has guided to full patient enrollment into the two Phase 3 trials the first quarter of 2014 and data readout is expected the first quarter of calendar year 2015.

Chris Hamilton - R.F. Lafferty

Okay, great. Thank you.

Operator

Thank you. At this time, I would like to hand the conference back to Cynthia Sullivan for closing remarks.

Cynthia Sullivan - President and Chief Executive Officer

So, we thank you very much for joining us this morning. And on behalf of the entire management team, I’d like to thank you for your continued support and your interest in Immunomedics.

Operator

That does conclude today’s conference call. You may now disconnect. Thank you and have a great day.

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