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ImmunoGen, Inc. (NASDAQ:IMGN)

F3Q10 (Qtr End 03/31/10) Earnings Call Transcript

April 29, 2009 4:30 pm ET

Executives

Carol Hausner – Executive Director, IR & Corporate Communications

Dan Junius – President & CEO

Greg Perry – SVP & CFO

Analysts

George Farmer – Canaccord Adams

Shiv Kapoor – Morgan Joseph

Joel Sendek – Lazard

Bret Holley – Oppenheimer

Pamela Bassett – Cantor Fitzgerald

Ling Wang – Brean Murray

Jason Kantor – RBC Capital Markets

Operator

Good day, and welcome everyone to the ImmunoGen's third quarter fiscal year 2010 earnings results conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Carol Hausner

Thank you and good afternoon. At 4 o’clock this afternoon, we issued a press release that summarizes our financial results for the quarter ending March 31, 2010, which is the third quarter of our 2010 fiscal year. I hope you've all had a chance to review it, if not, it's available on our website. During today's call we will make forward-looking statements. Our actual results may differ materially from the projections made. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which also can be accessed through our website.

In our call today, our Chief Executive Officer, Dan Junius, will provide an update on ImmunoGen, and our Chief Financial Officer, Greg Perry, will discuss our financial results and guidance. We will then open the call to questions. Dan?

Dan Junius

Thanks Carol and good afternoon everybody. There's certainly a lot to talk about both with respect to T-DM1, which has gotten a lot of attention of late as well as the rest of ImmunoGen's pipeline. There's certainly a lot of excitement around T-DM1. There's a growing awareness that it could be on the market in late 2010 or early 2011 and generating royalty revenue to ImmunoGen.

Roche has mentioned that this is a product that can have peak sales of anywhere from 2 billion to 5 billion Swiss Francs. And while T-DM1 is the most advanced compound in our pipeline, it is not the only one. In addition to T-DM1 and its many trials, today we have five other compounds in the clinic across eight trials.

By the end of this year, we expect to have seven compounds in the clinic in 13 trials and by the end of 2011; we will look to have another two to four compounds or 9 to 11 in total across as many as 20 trials. I think that what this reflects is a product portfolio that's becoming more advanced and broadening.

Clearly, there's the potential for the first marketed product in T-DM1 in the near term. We also expect at least one more phase III trial with T-DM1 to start this year. At the same time, sanofi-aventis expects to begin phase II testing with their first TAP compound, SAR3419, later this year.

We have three trials underway with our lorvotuzumab mertansine compound including a combination trial in multiple myeloma. This is the compound formerly known as IMGN901. We also expect to start a randomized trial later this year in small cell lung cancer and we're exploring initiating our first pivotal trial with the compound in 2011.

We have a second proprietary compound, IMGN-388 in phase I testing and we expect to advance a third proprietary compound into the clinic next year. What all this means for us is that we have a wealth of anticipated events in the coming months, that includes clinical data presentations, new product starts, regulatory events, etcetera. But we expect this activity – this level of activity to accelerate not just through the balance of this year but going forward, 2011 and beyond.

Through T-DM1, we have the potential for sustained and growing revenue from royalties starting in our 2011 fiscal year, which begins this July 1. But all this helps establish that our TAP technology can achieve new drugs for prevalent cancers that represent, to use the words of Roche's Global Head of Product Strategy and Chief Marketing Officer, a revolution in cancer care.

Let me start with T-DM1 and the most recent news around it. April 15 Roche disclosed they met with the FDA and based on these discussions that they planned to apply for U.S. marketing approval for T-DM1 in 2010. The basis of the application is the phase II trial whose preliminary findings were reported at the San Antonio Breast Cancer Symposium last December.

Roche reported that the FDA reacted to the data with great enthusiasm as the data are very strong. Further, Roche indicated that they will seek expedited review, which will enable T-DM1 to be available if approved by later this year or early 2011.

We've already started to see teaser ads sponsored by Roche/Genentech in clinical oncology journals. In their most recent communication, that would be their Analyst Day held in March and their quarterly call early this month, Roche noted that T-DM1 has shown what they call unprecedented efficacy in heavily pretreated HER2 positive metastatic breast cancer. They also noted that T-DM1 has shown better tolerability as a single agent than standard chemotherapy-containing regimens. And it's their view that the pricing of T-DM1 could be more aggressive than that of Herceptin. They indicated that they believe that Herceptin is underpriced and T-DM1 offers an opportunity to address this.

At the same time, they note that T-DM1 offers the benefit of being chemotherapy sparing, which certainly has an impact on the toxicity profile of the compound but also potentially benefits the overall cost of delivery. And as noted earlier, Roche did mention peak sales of T-DM1 as being between 2 billion and 5 billion Swiss Francs.

The development path for T-DM1 to date has followed that for Herceptin. They have a phase III trial, which they've called EMILIA, underway in second line metastatic breast cancer that compares T-DM1 used alone, head to head with Tykerb plus Xeloda and they've indicated that they expect to file out this study in 2012.

They also announced earlier this year that they plan to start a phase III trial named MARIANNE in first-line metastatic breast cancer later this year. This will compare T-DM1 head to head with Herceptin plus a taxane which is the standard first line of care today. It'll also include a leg in which T-DM1 is used together with pertuzimab.

The design of the first-line phase III trials informed by the findings of two phase II trials for which Roche already knows the data and that we'll see in the coming months. The first is data from a phase Ib/II study assessing T-DM1 used with pertuzimab that will be reported at ASCO.

Preliminary data from a phase II trial containing – comparing T-DM1 head-to-head with Herceptin plus Taxotere for first-line use will be reported at ESMO in October. There are additional development opportunities for T-DM1, ones that Roche has not yet spoken to, we don't know what their plans are but a clinical investigator reported in San Antonio that a protocol was being developed to assess T-DM1 for adjuvant use. And hopefully we'll hear more about Roche's plans in that area later this year.

There's also the potential to evaluate T-DM1 for cancers that Herceptin is just now starting to tap, such as gastric cancer. And T-DM1 may also offer an opportunity in cancers beyond those able to be treated with Herceptin, for example, it could be used in breast cancer patients with less than 3-plus expression of HER2 either as a single agent or as part of combination therapy.

And there are uses in other types of cancers that may have less robust expression of HER2. To finish up on T-DM1, there are a number of significant events anticipated in the coming months. First is the regulatory filing for advanced breast cancer. As noted at ASCO in June, we'll see data from the T-DM1/pertuzumab phase Ib/II trial that informed the decision to include this combination in the phase III first-line study. The start of the phase III first-line trial should start sometime after the middle of this year. And then at ESMO, we'll see preliminary data from the phase II trial assessing T-DM1 head to head with Herceptin plus Taxotere for first-line treatment.

Potential updates on the clinical programs such as plans for adjuvant evaluation and/or information on the second-line phase II study may be available over the course of this year and then finally, we would hope to hear about the regulatory decision on T-DM1 for advanced breast cancer.

Let me turn now to our wholly owned lorvotuzumab mertansine product candidate and again this is formerly what we had referred to IMGN901. Here, we're in the expansion phase of our trial evaluating lorvotuzumab mertansine for the treatment of CD56 positive solid tumors. In this trial, lorvotuzumab mertansine is administered daily for three days in a 21-day cycle.

We've narrowed the enrollment criteria to focus specifically on small cell lung cancer, Merkel cell carcinoma and ovarian cancer. We've also reduced the dose per day from 75mg/m2 to 60 mg/m2 and we plan to report updated findings at ESMO in October. We're using this trial to gain additional experience with the compound in all three noted indications but particularly with Merkel cell carcinoma.

This will help inform our decision about initiating pivotal testing with lorvotuzumab in this indication in 2011. We've been meeting with regulatory agencies here and in Europe to determine the type of study they'd like to see for approval in Merkel cell. And the information we've received is encouraging.

They indicated that it doesn't – that they agree with us that it doesn't make sense for this to be a large trial given the size of the patient population, but we've yet to determine exactly what the profile of that study would look like. And finally, a reminder that we gained orphan drug designation in Merkel cell both in the U.S. and in Europe.

We're developing a protocol for a randomized study in small cell lung cancer that compares etoposide plus cisplatin [ph] used with or without lorvotuzumab mertansine for the first-line treatment of small cell lung cancer. Here, lorvotuzumab mertansine works in a – by a different mechanism than these agents but we believe it's important to come in first-line as small cell lung cancer patients deteriorate quickly. The hope is that we'll start this trial before the end of this year and that's what we're gearing our operations towards.

Additionally, we have two trials underway evaluating lorvotuzumab mertansine for the treatment of multiple myeloma. One study is in monotherapy and the other where it's used in combination with Revlimid and dexamethasone.

In preclinical studies, we found that these agents act synergistically with lorvotuzumab. We would expect to report data from at least one but possibly both of these trials at ASH in December. For those other programs in our pipeline, IMGN388 is a compound that targets an integrin found on newly forming blood vessels and on many solid tumors. Here, we're continuing to dose-escalate in the phase I study that's underway and will report the first clinical data at ASCO in June. There's also solid progress being made with SAR3419, BIIB015 and BTO62 by sanofi-aventis, Biogen Idec and Biotest respectively.

SAR3419 is on track to advance into phase II testing the second half of this year. It will be the first TAP compound sanofi has advanced into phase II. We expect additional data on SAR3419 and BTO62 to be recorded at ASH and that should include data on the SAR3419 weekly dosing study.

For our other programs, the six clinical stage compounds, I've discussed, are making good progress, with several of them being evaluated in multiple trials. By the end of next year, this could double to as many as 12 including our own next wholly owned compound. We're also seeing strong interest on the business development front, particularly for multi-targeted licenses to our TAP technology.

Here, we want to be disciplined about pushing deal terms that reflect the increased value of our technology today. And we think that that's increased dramatically since the last deal that we did on a single agent or a single target license back in late 2008. But doing this tends to extend the time frame needed to complete negotiations, but we think that we're in fruitful discussions with a number of parties and we'll just have to see how those unfold.

We're excited about the progress we're making at ImmunoGen and we think 2010 will be a big step forward and with that, let me turn it over to Greg to review our financial results.

Greg Perry

Thank you, Dan. Our net loss for the third quarter of our 2010 fiscal year was $12.1 million or $0.21 per share compared to $4.6 million or $0.09 per share for the same quarter last year. This difference in the net loss is principally driven by reduced revenue in the current period compared to the prior period, $3.3 million versus $8.3 million respectively. That's largely because the prior year period included a $6.5 million milestone payment earned with the side of T-DM1 phase III testing.

As noted in earlier calls, the next T-DM1 event that triggers a milestone payment to us is expected to occur in our fiscal year beginning July 1, 2010. Our expenses in the third quarter of this fiscal year were slightly ahead of the same quarter last year, $15.5 million versus $12.7 million respectively.

This difference was driven primarily by our having greater R&D expenses in the current quarter compared with the same quarter last year, $12.1 million versus $9.5 million respectively, which is principally due to the greater investment we're making in the development of our own proprietary compounds and to less manufacturing overhead being allocated to partners for production of clinical materials.

We finished the quarter with $42.2 million in cash and marketable securities. Our cash used in operations over the course of the first nine months of this fiscal year was $30.9 million. Our guidance for our 2010 fiscal year is unchanged from our previous guidance and that is that our net loss will be between $53 million and $56 million.

We expect our cash use in operations will be between $38 million to $41 million and that we expect to end this fiscal year with cash and marketable securities of $33 million to $35 million. A couple of comments when looking at our projected cash usage, our projected cash usage for this fiscal year is considerably higher than in previous years largely because we haven't included any substantial upfront or milestone payments in this year's projections.

We are anticipating earnings in some meaningful milestone payments during our 2011 fiscal year, which begins July 1, 2010. We also expect to start receiving royalty revenue during that fiscal year. So overall, we're expecting our cash usage to peak in this current fiscal year and we would expect next year's cash usage to be lower than this year.

As Dan mentioned, we continue to see a high level of interest on the business development front, which is not reflected in our guidance due to the difficulties in predicting the size and timing of new deals. Interest is particularly strong for new single or multi-targeted licenses to our technology. We're committed to being patient to ensure that we do the right deals, ones that recognize the increased value of our technology. Dan?

Dan Junius

Thanks Greg. As I indicated during my comments that there's a lot going on that leads to a number of events and it's really something that's picking up a lot of speed. As we look just over the remaining month – couple of months in the first half, we would expect to see two new compounds entering the clinic from sanofi-aventis sometime before mid-year.

We would hope to see a regulatory filing for third-line therapy on T-DM1. That remains to be seen but certainly that will take place this year but we would hope to see it in the first half. And then we'll have clinical data at ASCO both for T-DM1 and the combination study with pertuzimab as well as the first data on IMGN388.

As we cross over into the back half of the year, the calendar gets even busier. There's the opportunity for a number of clinical events, the start of the first-line phase III study on T-DM1, the phase II study in non-Hodgkin's lymphoma for SAR3419, the small cell lung cancer study with lorvotuzumab mertansine starting in the back half of the year and so clearly, a lot going on in terms of clinical events.

There's also the opportunity that we might hear about adjuvant plans or maybe an update on the phase III second-line study for T-DM1. We'll have the opportunity hopefully by the end of this year to be able to clarify our plans for a pivotal study in Merkel cell for lorvotuzumab. And we also should be learning more about preclinical compounds that we would be looking to have come into the clinic by – sponsored by us as well as our partners at various conferences over the back half of the year.

Data – it should be a data rich time. We talked about at ESMO seeing the first-line phase II data on T-DM1. At that same conference, we would see additional data on lorvotuzumab mertansine on solid tumors. There's a possibility of the first Biogen Idec data on their compound, ORTC [ph] and then at ASH we would look to see data on all the hematologic compounds in the clinic including the multiple myeloma data on lorvotuzumab, SAR3419 data and also data on BTO62 from Biotest.

And then finally at San Antonio, while we don't know what the lineup would look like, I would expect there would be additional data on T-DM1. And I think the big event over the back half of the year hopefully would be the approval for T-DM1 for third-line therapy. And sprinkled across both first half and second half of the year would be the opportunity for business development activity.

So again, I think this represents just the maturation of the company to the point that we're seeing this level of activity across so many compounds and it makes for a very exciting time for ImmunoGen. So with that I'll turn it back to Carol.

Carol Hausner

Excellent. We are about to open the call to questions. As usual, I'd like to ask that you limit questions to one to two per person until each analyst has had a chance to ask questions and then you can come back on the line. Operator, we are now ready to open the lines for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We'll take our first question from George Farmer with Canaccord Adams.

George Farmer – Canaccord Adams

Hi, good afternoon. Thanks for taking my question. I want to just see if you can give us some background on what transpired with Roche's decision to ultimately go ahead and file for accelerated approval of T-DM1. We were all kind of faced with a lot of uncertainty at the beginning of this calendar year and maybe you could kind of walk us through what was happening, if you can and ultimately what drove Roche to this decision to go ahead and file as Genentech had been guiding much more aggressively beforehand.

Dan Junius

Hi, George. It's Dan. If I had direct information, I couldn't share it so therefore it's much easier for me to respond because everything I have is inferred. As you said Genentech had been much more open and aggressive about what their plans were but it seems to be the timeline that's taking place now under Roche.

I think that many of the Genentech people that we've seen are still involved in it. We haven't seen anything that has shifted timelines after the acquisition took place. I think that the external view from Roche reflected probably just a more conservative posture based on interaction with the FDA and they didn't want to – they wanted to maintain that position until they had gotten assurance that the path that they were following was going to be well received by the regulatory authorities.

You go back and nothing changed in terms of the underlying data. It was great data before. It was great data after Roche got involved. You are dealing with an indication where there is a significant unmet need that clearly was being addressed in a meaningful way by this therapy. And I think the only really maybe open question with anyone and again this is still speculation on my part, would be the receptivity of the agency to a single-arm study as opposed to what everyone is concerned about, that they're only going to approve randomized trials. I think that when you have the criteria of very solid data, a good safety database, a clear unmet need, I think the FDA has indicated here that they're working on – they’re going to be certainly sensitive to patient safety but they're also going to be sensitive to the need of patients and I think that was probably what was behind their response.

George Farmer – Canaccord Adams

All right. Thanks.

Operator

We'll go next to Shiv Kapoor with Morgan Joseph.

Shiv Kapoor – Morgan Joseph

A question, I've got a couple of them. First, have you or sanofi seen the results from the second phase I study from SAR3419? I believe they were waiting for those results to make sure what kind of scheduling that drug will have in the next phase, so just inquiring about that.

Dan Junius

Shiv, we can't tell you what it is but yes, we have seen some of the data and that's an ongoing study but we have some awareness of the data they've seen from the weekly dosing study.

Shiv Kapoor – Morgan Joseph

Can you tell us whether this phase II trial that will start in the second half, has it been decided what kind of dosage you will have?

Dan Junius

I don't know. I don't know whether it's been decided or not. So I think there's nothing I can share there.

Shiv Kapoor – Morgan Joseph

Okay. One question about the potential synergy between T-DM1 and pertuzimab, it seems like there's a lot of emphasis by Genentech on that. What kind of data do you already have on the synergy?

Dan Junius

There's been some – there was an abstract at AACR on it. I don't know the detail on that. Certainly, it showed very strong activity but they would certainly have data off of the study that's been complete that they're going to report at ASCO. And again, we don't have it so it's easy not to share it. But I think again that you can infer that they took a 40-patient study and off of that included a third arm in a phase III first-line therapy. One can only surmise that the data had to be pretty compelling for them to include a third arm with those characteristics.

Shiv Kapoor – Morgan Joseph

Right. Thanks. Fair enough.

Dan Junius

Sure.

Operator

We'll go next to Joel Sendek with Lazard.

Joel Sendek – Lazard

Hi, thanks. I actually have a followup on that, on 3419 with regard to – can you give us any insight as to how big of a phase II it will be, whether it will be a randomized study, how long the time frame will be until we get data? Do you have any guesses on that?

Dan Junius

No. I don't, I'm afraid, Joel. I think that they are looking at certain subtypes as opposed to looking across the full spectrum. I think that will be based on the activity they saw in the earlier studies. I haven't – I don't know whether that will be randomized or not. It – we do think it is going to be either more than one trial or at least multiple arms to a study.

Joel Sendek – Lazard

Okay. All right. That's helpful and then just quickly on T-DM1, just looking into the future, do you think that Genentech has anointed a regulatory strategy for label expansion beyond the current strategy, whether it's adjuvant or first-line or anything or is it all kind of open for consideration right now?

Dan Junius

I guess all I can say is it's not clear. My guess is that they're working their way through some of those issues. It's one of those things that as you go – get beyond adjuvant into some of these other areas, my guess is they've been thinking in terms of Herceptin and you saw that with the work that they did to take Herceptin into gastric. But they may now have – and again speculation on my part, but they may now have leapfrogged some of that to say well, if I've got a compound that I'm looking to replace Herceptin certainly in the metastatic setting, that's unequivocal at this point. Why would I – would I then pursue sort of a two-step strategy in other areas of first Herceptin and then T-DM1 as opposed to pursuing T-DM1. I think we may get more insight in that as we see the data that comes out at ASCO and ESMO. Because I think if – and again, I don't know the data but if you've got very compelling data coming out in combination therapy with pertuzimab or with the Taxotere data that we see at ESMO, I think that would also shed some light on the potential for T-DM1 going into other lines of treatment.

Operator

And we'll go next to Bret Holley with Oppenheimer.

Bret Holley – Oppenheimer

Yes. Thanks for taking the question. I was actually wondering about lorvotuzumab in small cell lung cancer and the plan to go forward with the trial with T-DM1, just wondering what kind of toxicity might be overlapping between etoposide and a platinum [ph] agent and 901 and I guess how can you take a guess at dosing lorvotuzumab in that trial?

Dan Junius

Well the – I guess, the overlapping – the potential for overlapping toxicity there is potentially neuropathy because we have seen some of that at relatively low grade but we have seen some of that. The thinking is because of the efficacy we've seen preclinically, it's worth doing it. It's worth trying it because we've seen activity in small cell at relatively low levels of lorvotuzumab as monotherapy. So the thinking is by using a targeted agent like this that we may be able to, in combination in particular, we may be able to extend – while you get – you get responses off of etoposide and cisplatin. So, you don't get durability.

So we may able to impact durability and we may also look then at once a patient's through the regimen of the standard of care, maintaining –- keep them on lorvotuzumab as maintenance therapy. So there's a lot to learn here, Bret, but I do think that because we have seen good activity, we have seen activity at relatively low doses. It's something that we want to explore further.

Bret Holley – Oppenheimer

Okay. Thanks.

Operator

We'll go next to Pamela Bassett with Cantor Fitzgerald.

Pamela Bassett – Cantor Fitzgerald

Hi, thanks for taking my question. It sounds like there's an uptick in interest from potential partners and an intensification around partnering activity and I'm wondering if most of this is partners bringing their own targets or mAbs or are you generating mAbs for them in addition to access to the platform.

Dan Junius

Let me take a half a step back, Pamela and just sort of set the landscape because a lot of where the interest is coming from is out of parties who have made significant investments in antibody platforms but have not yet gotten the level of productivity that they had anticipated or haven't brought things into the clinic, which we suspect is because they've found good targeting vehicles but haven't seen efficacy as naked agents. And so that's where the demand is coming from.

People have a portfolio of naked agents that they've developed over the years and they've got some candidates they find probably more attractive than others and they're looking at utilizing this technology to lever off of the base of work that they've done to develop high caliber antibodies that have good specificity and other characteristics. But now to provide them the potency that they need that they don't have on their own. So it's not – we're not at the point of using – at some point we do have earlier stage programs that we may look to talk to people about but the demand that we're referencing today really is from people who have portfolios and think that based on their work as well as what they're seeing taking place across the whole antibody drug conjugate space, that they're – they may not have the empirical data that Genentech is working with and the depth of the work that Genentech has done, but they're seeing the clinical data and concluding this is an area where they need to have the presence.

Pamela Bassett – Cantor Fitzgerald

And are you at this point leveraging – trying to leverage the platform beyond mAbs into some emerging opportunities that would require targeting like RNAi?

Dan Junius

We're looking beyond mAbs at other targeting vehicles and RNAi is more of an active agent as opposed to a targeting vehicle and there is the potential there but that is a lower level of priority. We continue to spend time looking at how we can extend our portfolio of toxic agents because there are other characteristics we'd like to find in our toxic agents that would be even more effective than the portfolio we have today or give us access to cancers where antimycotic agents don't have any effect. So we invest more there than looking at new forms of active agents. Although we do some of that, but more in the direct cell (inaudible) mode than something like RNAi.

Pamela Bassett – Cantor Fitzgerald

And will extending into additional agents require new linkers or will you be able to use the same linkers, do you think?

Dan Junius

We'll be able use in certain instances the same linkers, in other instances we'll need to be looking at new means of attachment. But that's – we don't see that as a very steep hill to climb. We look at new linkers even with our existing portfolio to develop other characteristics that will provide benefit in certain indications.

Pamela Bassett – Cantor Fitzgerald

And would these platform expansions, might they be supported by some of your future deals?

Dan Junius

Supported by …

Pamela Bassett – Cantor Fitzgerald

No – on this – in the context of a new partnership.

Dan Junius

Well, we'd certainly make them available to a new partnership. We make, generally speaking, for example, if we're dealing in maytansine arena, we would make any of the maytansine tools that we have available, we'd make those available to a partnership. Now, that's different if we get into a different technology for a cytotoxin, we'd put that into a separate category. So that would come under a separate agreement, but we think, it continues to provide us – the ultimate – the objective here is to continue to come up with better means of attacking cancer and so we stay focused on that. If we do that, it's going to enhance our ability to develop efficacious compounds and it's going to make our technology more attractive to partners.

Pamela Bassett – Cantor Fitzgerald

Okay. Great. Thanks.

Dan Junius

Sure.

Operator

We'll go next to Ling Wang with Brean Murray.

Ling Wang – Brean Murray

Thank you for taking my questions. So I was wondering with regard to lorvotuzumab in Merkel cell carcinoma, it seems to me you have had interesting preliminary activity in the indication and you had a conversation with FDA. So going forward what are the factors that might impact you to make the go/no-go decision and also do you expect to see any data from the expanded [ph] phase this year?

Dan Junius

Ling, I think what you'll see from a data standpoint, I would expect we would have more data at ESMO later this year. I think the factors that we're looking for is a couple. One is we want to recruit more patients, the data that's been shared thus far is on six patients dosed in Merkel cell and while it's a small indication, that's a very small database, so we want to see that. We've already talked to the agency around trial design so we've got that input and we need to think more about that and figure out what that would look like.

The other variable, I think is to receive input from KOLs. We'll be doing that and gaining their insights so that we can get them to reflect on our data, on our proposed trial designs and get some assistance or insight from them about the path that we're taking. And so generating data is going reasonably well. I think that the visibility that we've gotten in Merkel cell has created a fair amount of attention in that the small number of patients that contract that disease and that really has helped recruitment to some extent. And we're finding good interest from KOLs but we just need some time to let all of that build so that we can synthesize and then come up with a path by the end of the year.

Ling Wang – Brean Murray

I see. And then to follow up on the small cell lung cancer trial that are planned to start second half of this year. I was wondering whether you can give a little bit more color on the trial design, how big the trial will need to be and what are the endpoints of the trial.

Dan Junius

It's a little early, Ling. A legitimate question but we're still sorting through some of that ourselves and trying to think about what the right locations are, how we can structure this to recruit quickly. So I would expect we'd have that type of information certainly when we get to our year end call, but our thinking is that we're just working through that right now so I can't give you more color.

Ling Wang – Brean Murray

I see. And if I may, I was wondering whether you can comment on maybe whether Roche has commented on what would be the regulatory strategy for T-DM1 in European. Is it relatively away for the phase III second-line trial data for (inaudible)?

Dan Junius

Yes. That is the plan. They – our experience just working through the regulatory authorities in the U.S. and Europe has confirmed that you really do have – They have similar mindsets but maybe a little bit more open minded in the U.S. and that the Europeans really do want to see randomized studies for approval of therapies whereas, as I noted earlier in response to another question, the FDA has shown some different flexibility, if the facts and circumstances and data are correct.

So out of that, Roche has indicated that regulatory approval for T-DM1 would be in second-line off of the EMELIA trial that's underway right now outside the U.S. So that would be the first regulatory submission outside the U.S. would be off of the phase III second-line study. And they indicated from a timing standpoint that they would expect that to be in 2012.

Ling Wang – Brean Murray

Okay. Thank you very much.

Dan Junius

Thanks Ling.

Operator

We'll go next to Jason Kantor with RBC Capital Markets.

Jason Kantor – RBC Capital Markets

Hi, thanks for taking my question. Could you give us some examples of what you think the right kind of deal structure or deal terms might be for your technology licensing deals going forward? Is there a template you would point us to?

Dan Junius

Yes. The starting point, I guess, would be, as I noted when we did our last license and that was with Bayer in October of 2008. We had $4 million up front. We had $170 million in milestones and we have royalties that go up into the high single digits. We think that terms should now be more generous than that. So we think, as we think about upfronts and royalties and even the possibility of opt-ins, we think that there's – And also I think, Jason, at the same time, the breadth of interest affords us the opportunity to be more aggressive in our ask. But to get satisfaction you're going to have to – we have to be patient. I think that since those terms were negotiated going back to that point in time, that's a year and a half now, there's been an awful lot of data that's come out. I mean, clearly, there's been a lot of T-DM1 data. There's been a lot of data on our other compounds. So we think that you could argue that in October of 2008 and the terms were obviously negotiated somewhat before then, that there was some question as to whether it was a validated technology.

I don't think anybody would make that argument now. Now, you could say what's the breadth of validation but I think even there you're seeing some breadth to it and at the same time, we've brought new innovations into the range of tools that we have available to apply to a compound. And I think that there is – I think that has the impact of reducing risk to a partner and that should be reflected, I think in how the pricing is structured.

Jason Kantor – RBC Capital Markets

Great. And then you outlined a reduction in cash burn for fiscal year 2011 but can you speak to your needs for additional capital? I mean, do you – at what point – how much more cash do you think you need before you would consider yourself on a path to profitability?

Greg Perry

I think, if you look at our guidance, we're talking about an expectation of cash balance of $33 million to $35 million at the end of our fiscal year, which is June, which we describe is about a year's worth of cash. And from that standpoint, what we have always said is we prefer to extend the runway with business development. Certainly given all of what Dan's talked about and what I talked about in terms of the business development environment and what we're trying to achieve with these deals, we have to be mindful of liquidity and so we're certainly keeping an eye on capital markets as well.

But we do think that we start to see some meaningful royalty revenues over the next say two to three years. I mean, certainly depending on how the regulatory strategy unfolds and what the ramp looks like, there's some uncertainties there. But perhaps if you look at kind of three years out and you look at that kind of a burn that might give you some type of a sense of where we're at.

Jason Kantor – RBC Capital Markets

Thanks.

Operator

And that concludes our question and answer session. I'd like to turn the conference back to Carol Hausner for any closing remarks.

Carol Hausner

Great and thank you all. Thank you for your interest and again, if you have any outstanding questions, just give me a ring at 781-895-0600. Have a good evening.

Operator

Thank you everyone. That does conclude today's conference. We thank you for your participation.

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Source: ImmunoGen, Inc. F3Q10 (Qtr End 03/31/10) Earnings Call Transcript

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